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<!-- Field: Rule-Page --><DIV STYLE="margin-top: 10pt; margin-bottom: 3pt; width: 100%"><DIV STYLE="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 14pt"><B>UNITED
STATES</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 14pt"><B>SECURITIES
AND EXCHANGE COMMISSION</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font: 12pt Times New Roman, Times, Serif"><B>WASHINGTON,
D.C. 20549</B></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 18pt"><B>FORM
10-Q</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif">(Mark One)</FONT></P>

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    <TD STYLE="width: 4%; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">&#9746;</FONT></TD>
    <TD STYLE="width: 96%; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">QUARTERLY
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"></FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">For
the quarterly period ended March 31, 2021</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

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    <TD STYLE="width: 4%; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">&#9744;</FONT></TD>
    <TD STYLE="width: 96%; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 12pt">TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">For
the transition period from _____________ to _______________</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">Commission
File Number 000-56230</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 24pt"><B>Kona
Gold Beverage, Inc.</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">(Exact
name of registrant as specified in its charter)</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
<TR STYLE="vertical-align: top">
<TD STYLE="width: 50%; padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Delaware</B></FONT></TD>
<TD STYLE="width: 50%; padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>81-5175120</B></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(State
or other jurisdiction of incorporation or organization)</FONT></TD>
<TD STYLE="padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(IRS Employer
Identification No.)</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="text-align: center; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
<TD STYLE="text-align: center; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR>
<TD STYLE="text-align: center; vertical-align: top"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>746
North Drive, Suite A<BR>
Melbourne, Florida </B></FONT></TD>
<TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>32934</B></FONT></TD></TR>
<TR>
<TD STYLE="vertical-align: top; padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Address
of principal executive offices)</FONT></TD>
<TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Zip
Code)</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>&nbsp;</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>(<FONT STYLE="background-color: white"><U>844)
714-2224</U></FONT></B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">(Registrant&rsquo;s
telephone number, including area code)</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif"><B>Securities
registered pursuant to Section 12(b) of the Act:</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
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    <TD STYLE="padding: 0pt; width: 40%; border-bottom: black 1pt solid; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Title
    of each class</B></FONT></TD>
    <TD STYLE="padding: 0pt; width: 2%; border-bottom: black 1pt solid; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; width: 19%; border-bottom: black 1pt solid; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Trading
    Symbol(s)</B></FONT></TD>
    <TD STYLE="padding: 0pt; width: 2%; border-bottom: black 1pt solid; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; width: 37%; border-bottom: black 1pt solid; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Name
    of each exchange on which registered</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes&nbsp;&#9746; No&nbsp;&#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes&nbsp;&#9746; No&nbsp;&#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer,&rdquo; &ldquo;smaller reporting company,&rdquo;
and &ldquo;emerging growth company&rdquo; in Rule 12b-2 of the Exchange Act.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; width: 45%; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large
    accelerated filer&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; width: 12%; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&#9744;</FONT></TD>
    <TD STYLE="padding: 0pt; width: 39%; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated
    filer&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; width: 4%; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&#9744;</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-accelerated
    filer&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&#9744;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Smaller
    reporting company&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&#9746;</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging
    growth company</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;&#9746;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. &#9744;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes&nbsp;&#9744; No&nbsp;&#9746;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">The
number of shares of the issuer&rsquo;s common stock, par value $0.0001 per share, outstanding as of May 17, 2021 was <FONT STYLE="background-color: white">840,163,265</FONT>.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>INDEX TO FORM 10-Q FILING</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>FOR THE QUARTER ENDED MARCH 31, 2021</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

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    <TD STYLE="padding: 0pt; width: 10%; border-bottom: black 1pt solid; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; width: 1%; border-bottom: black 1pt solid; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; width: 83%; border-bottom: black 1pt solid; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; width: 1%; border-bottom: black 1pt solid; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; width: 5%; border-bottom: black 1pt solid; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Page</B></FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PART I</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A HREF="#a_006">FINANCIAL INFORMATION</A></B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 1.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_007">Financial Statements</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Kona Gold Beverage, Inc.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_001">Unaudited Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-1</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_002">Unaudited Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-2</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_003">Unaudited Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-3</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_004">Unaudited Consolidated Statements of Stockholders&rsquo; Equity (Unaudited) for the Three Months Ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-4</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_005">Notes to the Unaudited Consolidated Financial Statements (Unaudited)</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-5</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>

<TR STYLE="background-color: white">
    <TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: top; width: 83%; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>S and S Beverage, Inc. </B></FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; width: 5%; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_001">Unaudited Balance Sheet as of January 31, 2021 and audited balance sheet as of December 31, 2020</A></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-41</TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_002">Unaudited Statements of Loss for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-42</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_003">Unaudited Statements of Stockholders&rsquo; Deficit for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-43</TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_004">Unaudited Statements of Cash Flows for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-44</TD></TR>
  <TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_005">Notes to the Consolidated Financial Statements</A></FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-45</TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt; width: 10%">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt; width: 83%">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt; width: 1%">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt; width: 5%">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 2.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_008">Management&rsquo;s Discussion and Analysis of Financial Condition and Results of Operations</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">54</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 3.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_009">Quantitative and Qualitative Disclosures about Market Risk</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">77</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 4.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_010">Controls and Procedures</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">77</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>PART II</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: center; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A HREF="#a_011">OTHER INFORMATION</A></B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 1.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_012">Legal Proceedings</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 1A.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_013">Risk Factors</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 2.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_014">Unregistered Sales of Equity Securities and Use of Proceeds</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 3.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_015">Defaults upon Senior Securities</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 4.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_016">Mine Safety Disclosures</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 5.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_017">Other Information</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">78</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Item 6.</B></FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_018">Exhibits</A></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">79</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD COLSPAN="3" STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><A HREF="#a_019">SIGNATURES</A></B></FONT></TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt; text-align: right; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">82</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_006"></A>PART I - FINANCIAL INFORMATION</B></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><A NAME="a_007"></A>Item 1. Financial Statements</B></P>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>INDEX TO FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <TD STYLE="vertical-align: top; width: 90%; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Financial Statements of Kona Gold Beverage, Inc. (formerly known as Kona Gold Solutions, Inc.)</B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 10%; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt">&nbsp;</TD>
    <TD STYLE="vertical-align: bottom; text-align: right">&nbsp;</TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_001">Unaudited Consolidated Balance Sheet as of March 31, 2021 and audited Balance sheet as of December 31, 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right">F-1</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_002">Unaudited Consolidated Statements of Loss for the three months ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right">F-2</TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_003">Unaudited Consolidated Statements of Stockholders&rsquo; Deficit for the three months ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right">F-3</TD></TR>
  <TR STYLE="background-color: #CCEEFF">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_004">Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right">F-4</TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 9pt; text-indent: -9pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><A HREF="#a_005">Notes to the Unaudited Consolidated Financial Statements</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; text-align: right">F-5</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>

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<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B><A NAME="a_001"></A>Balance Sheet</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

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    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Unaudited</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Audited</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Three Months Ended</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Year Ended</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">March 31,</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">December 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: italic bold 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">ASSETS</TD><TD STYLE="font: italic bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: italic bold 10pt Times New Roman, Times, Serif; text-align: center">2021</TD><TD STYLE="font: italic bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: italic bold 10pt Times New Roman, Times, Serif; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD COLSPAN="9" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; width: 56%; text-align: left; text-indent: -10pt">Cash and cash equivalents</TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right">56,201</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right">113,168</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accounts
    receivable, net of allowance for doubtful accounts of $3,967 and $5,019, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">111,676</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Other receivables</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">14,876</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">14,876</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Inventory</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">861,652</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">660,504</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Other current assets</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">7,518</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5,572</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total current assets</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,051,923</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">794,120</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">NON-CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Property, plant and equipment, net</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">178,230</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">167,872</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Right-of-use asset, net</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">875,970</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">912,993</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Intangible property, net</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">79,441</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">69,488</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Goodwill</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,275,938</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Note receivable, net of allowance $1,500,000 and $0, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Deposit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">6,500</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">6,500</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total non-current assets</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">2,416,079</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">1,156,853</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 40pt; text-align: left; text-indent: -10pt">Total assets</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,468,002</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">1,950,973</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: italic bold 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 10pt; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accounts payable</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">257,846</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">208,599</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Amounts owed to customers</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">10,508</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Credit card payables</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">6,544</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">19,469</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Current note payable - related party</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">9,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">12,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Current lease liability</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">112,383</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">149,407</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Convertible debt</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,200,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">900,000.00</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Derivative liability</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">627,018</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">361,152.00</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accrued compensation</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">318,958</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">257,500.00</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accrued stock compensation</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,386,497</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,386,497</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accrued liabilities</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">105,033</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">81,624</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total current liabilities</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">4,023,279</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">3,386,756</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">NON-CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Line of credit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">398,470</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">398,470</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Line of credit - related party</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,498,151</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,495,151</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Note payable - related party, net of current</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">56,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">56,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Note payable</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">642,282</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">PPP note payable</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">212,648</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">95,161</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Lease liability, net of current</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">763,587</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">763,586</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total liabilities</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">7,594,417</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">6,195,124</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">COMMITMENTS AND CONTINGENCIES (NOTE 13)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">STOCKHOLDERS&rsquo; DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Preferred Stock Series A, $.00001 par value, 0 shares authorized, 0 issued, and outstanding, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Preferred Stock Series B, $.00001 par value, 1,200,000 shares authorized, 488,000 issued and outstanding, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Preferred Stock Series C, $.00001 par value, 250, 3,300,000 and 3,300,00 shares authorized, 140 and 0 issued, and outstanding, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Preferred Stock Series D, $.00001 par value, 500,000 shares authorized, 500,000 issued, and outstanding, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Common Stock, $.00001 par value, 2,500,000,000 authorized, 825,726,839 and 786,308,041, issued and outstanding, respectively</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">8,257</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">7,863</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Additional paid-in capital - warrants</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,334,136</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">281,565</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Additional paid-in capital</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5,630,762</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">4,746,447</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accumulated deficit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(11,099,579</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(9,280,036</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total stockholders&rsquo; deficit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(4,126,415</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(4,244,151</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 40pt; text-align: left; text-indent: -10pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">3,468,002</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">1,950,973</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B STYLE="font-style: normal; font-weight: normal">See notes to financial statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Kona Gold Beverage, Inc. and Subsidiaries
Unaudited</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_002"></A>CONSOLIDATED STATEMENTS OF INCOME</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">THREE MONTHS ENDED</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">March 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">2021</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">REVENUES, NET OF SALES, RETURNS, AND ALLOWANCES OF $28,707 AND $51,159, RESPECTIVELY</TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right">462,408</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right">202,057</TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">COST OF REVENUES</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">313,920</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">145,967</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Gross profit</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">148,488</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">56,090</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">OPERATING EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Selling, general and administrative expenses</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">568,980</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">647,219</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Income (Loss) from operations</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(420,492</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(591,129</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Other income / (expense)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest expense</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(17,373</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(3,807</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest expense related to loan origination fee on convertible note</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(41,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest expense related to warrants on convertible note</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(1,052,571</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest expense on convertible note</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(19,966</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Loss on derivative</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(265,866</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Tax expense</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(2,275</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (Loss)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,819,543</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(594,936</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">WEIGHTED AVERAGE NUMBER OF COMMON SHARES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Basic and diluted</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">775,469,306</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">710,868,609</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">NET LOSS PER COMMON SHARES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Basic and diluted</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(0.00</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-style: normal; font-weight: normal">See
notes to financial statements</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-style: normal; font-weight: normal"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><FONT STYLE="font-style: normal; font-weight: normal"></FONT>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B><A NAME="a_003"></A>Statements of Stockholders&rsquo;
Deficit</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Common Stock</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Preferred Stock</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><B>Additional</B></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center">Total</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">$.00001 Par</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">$.00001 Par</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid"> Paid</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Accumulated</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Stockholders&rsquo;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Shares</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Amount</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">in Capital</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Deficit</TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font: bold 10pt Times New Roman, Times, Serif; text-align: center; border-bottom: Black 1pt solid">Deficit</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 37%; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance December 31, 2019</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">763,967,603</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">7,640</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,988,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">50</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,155,777</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(6,154,441</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="width: 2%; font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="width: 5%; border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,990,976</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Compensation</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5,000,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">50</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">318,450</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">318,500</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(594,936</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(594,936</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance March 31, 2020</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">768,967,603</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">7,690</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,988,000</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">50</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,474,227</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(6,749,377</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(2,267,412</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Sponsorship Agreements</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">85,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">2,577</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">2,578</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Compensation</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">5,000,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">50</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">157,450</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">157,500</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Warrants related to convertible note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">281,565</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">281,565</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,066,920</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,066,920</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance June 30, 2020</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">774,052,603</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">7,741</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,988,000</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">50</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,915,819</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(7,816,297</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(2,892,689</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Conversion to Preferred Stock</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(140</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">140</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0.00</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Preferred Stock Conversion to Common Stock</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">4,000,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">40</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(4,000,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">(40.00</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">&mdash;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Accrued Common Stock Issues for Compensation</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">140</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">0</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">2</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">2</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(509,441</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(509,441</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance September 30, 2020</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">778,052,603</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">7,781</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">988,140</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">10</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">4,915,821</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(8,325,738</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(3,402,128</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Conversion of Convertible Debt</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">8,255,438</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">83</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">112,191</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">112,274</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(954,298</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(954,298</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance December 31, 2020</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">786,308,041</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">7,863</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">988,140</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">10</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">5,028,012</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(9,280,036</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(4,244,153</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Conversion of Convertible Debt</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">30,418,798</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">304</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">613,505</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">613,809</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Common Stock Issued for Acquisition</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">9,000,000</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">90</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">270,810</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">270,900</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Warrants related to convertible note</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,052,571</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right">1,052,571</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,819,543</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right">(1,819,543</TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: bold 10pt Times New Roman, Times, Serif; text-indent: -10pt">Balance March 31, 2021</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">825,726,839</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">8,257</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">988,140</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">10</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">6,964,898</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">&nbsp;</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(11,099,579</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font: 10pt Times New Roman, Times, Serif; text-align: right">(4,126,416</TD><TD STYLE="padding-bottom: 2.5pt; font: 10pt Times New Roman, Times, Serif; text-align: left">)</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-style: normal; font-weight: normal">See
notes to financial statements</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-style: normal; font-weight: normal"></FONT></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><FONT STYLE="font-style: normal; font-weight: normal">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Kona Gold Beverage, Inc. and Subsidiaries
Unaudited</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_004"></A>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>For the Three Months Ended March 31,</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">2021</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; color: #323232; text-align: left; text-indent: -10pt">Net loss</TD><TD STYLE="width: 8%; color: #323232">&nbsp;</TD>
    <TD STYLE="width: 1%; color: #323232; text-align: left">$</TD><TD STYLE="width: 12%; color: #323232; text-align: right">(1,819,543</TD><TD STYLE="width: 1%; color: #323232; text-align: left">)</TD><TD STYLE="width: 8%; color: #323232">&nbsp;</TD>
    <TD STYLE="width: 1%; color: #323232; text-align: left">$</TD><TD STYLE="width: 12%; color: #323232; text-align: right">(594,936</TD><TD STYLE="width: 1%; color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
  <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Adjustments to reconcile net income to net cash &nbsp;provided by operations:</TD>
  <TD>&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: left">&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: right">&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: left">&nbsp; &nbsp;</TD>
  <TD>&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: left">&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: right">&nbsp; &nbsp;</TD>
  <TD STYLE="text-align: left">&nbsp; &nbsp;</TD>
</TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Depreciation and Amortization</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">9,907</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">4,981</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Common Stock Issued in Exchange for Services</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Common Stock Issued in Acquisition</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">270,900</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Common Stock Issued for Sponsorship</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Common Stock Issued for Compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">318,500</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Preferred Stock Issued for Compensation</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Interest expense related to warrants on convertible debt</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">1,052,571</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in accounts receivable</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(122,184</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">8,015</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in other receivable</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in inventory</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(201,148</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(96,608</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in prepaids</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in other current assets</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(1,946</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(1,723</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in deposits</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Decrease (increase) in right-of-use asset</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">37,023</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">17,157</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in accounts payable</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">49,246</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">90,270</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in credit card payable</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(12,925</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">7,317</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in accrued compensation</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">61,458</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in accrued stock compensation</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in accrued expenses</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">23,409</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">3,587</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in derivative liability</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">265,866</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; color: #323232; text-align: left; text-indent: -10pt">Increase (decrease) in lease liability</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">(37,023</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">)</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">(16,537</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) operating activities</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(424,389</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(259,977</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Purchases of property, plant and equipment</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(20,265</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(16,881</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Changes in goodwill</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(1,275,938</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Changes in intellectual property</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">(9,953</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">)</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">2,044</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) investing activities</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(1,306,156</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(14,837</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Proceeds from shareholder payable</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes in note payable - related party</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(3,000</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">260,120</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes in line of credit - related party</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(3,000</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes in note payable - acquisition</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">642,282</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes line of credit</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Changes in convertible debt</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">913,809</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">&mdash;</TD><TD STYLE="color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; color: #323232; text-align: left; text-indent: -10pt">Changes in PPP note payable</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">117,487</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) financing activities</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">1,670,578</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">257,120</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">Net cash increase for period</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(59,967</TD><TD STYLE="color: #323232; text-align: left">)</TD><TD STYLE="color: #323232">&nbsp;</TD>
    <TD STYLE="color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; text-align: right">(17,694</TD><TD STYLE="color: #323232; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-indent: -10pt">Cash at beginning of period</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">113,168</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; color: #323232; text-align: right">36,223</TD><TD STYLE="padding-bottom: 1pt; color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-indent: -10pt">Cash at end of period</TD><TD STYLE="color: #323232; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: #323232; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: #323232; text-align: right">53,201</TD><TD STYLE="padding-bottom: 2.5pt; color: #323232; text-align: left">&nbsp;</TD><TD STYLE="color: #323232; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; color: #323232; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; color: #323232; text-align: right">18,529</TD><TD STYLE="padding-bottom: 2.5pt; color: #323232; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; color: #323232; font-weight: bold; text-align: left; text-indent: -10pt">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Cash paid for income taxes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Cash paid for interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,205</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">35,877</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B STYLE="font-style: normal; font-weight: normal">See notes to financial statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B><A NAME="a_005"></A>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 1 &ndash; ORGANIZATION AND DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Kona Gold Beverage, Inc., a Delaware corporation
(&ldquo;Kona Gold,&rdquo; the &ldquo;Company,&rdquo; &ldquo;we,&rdquo; &ldquo;us,&rdquo; or &ldquo;our&rdquo;), owns and operates a line
of premier CBD lifestyle brand products. As of March 31, 2021 the Company has four wholly-owned subsidiaries: Kona Gold LLC, a Delaware
limited liability company (&ldquo;Kona&rdquo;), HighDrate LLC, a Florida limited liability company (&ldquo;HighDrate&rdquo;), Gold Leaf
Distribution LLC, a Florida limited liability company (&ldquo;Gold Leaf&rdquo;), and in February 2021, the Company acquired all of the
capital stock of S and S Beverage, Inc. (&ldquo;S and S&rdquo;), a Wisconsin corporation. The Company is primarily focused on product
development in the functional beverage sector. Kona Gold creates hemp-infused energy drinks, which includes hemp energy drinks, CBD energy
water, and also sells Kona Gold merchandise and apparel, which promotes the Company&rsquo;s beverages. HighDrate focuses on the development
and marketing of CBD-infused energy waters geared towards the fitness and wellness markets. S and S focuses on the development and marketing
of lemon-flavored beverages under the name OOH LA Lemin. Gold Leaf focuses on the distribution of premium beverages and snacks in key
markets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company currently sells its products
through resellers, the Company&rsquo;s websites, and distributors that span across 27 states. The Company&rsquo;s products are available
in wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">As used herein, the terms &ldquo;Kona Gold,&rdquo;
the &ldquo;Company,&rdquo; &ldquo;we,&rdquo; &ldquo;us,&rdquo; or &ldquo;our, refer to Kona Gold individually or, as the context requires,
collectively with its subsidiaries on a consolidated basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>The Company&rsquo;s Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has two reportable segments:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Beverages. </I>Includes three types of beverage products: (i) hemp-infused energy drinks, (ii) CBD-infused energy water, (iii) CBD-infused high-alkaline water, and (iv) lemon flavored beverages, as well as apparel with the Kona Gold logo. The Beverages Segment includes all of Kona&rsquo;s, HighDrate&rsquo;s, and S and S&rsquo;s operations. Additional information regarding these products is below. The Company considers this a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying Consolidated Financial Statements present financial information in a format that is consistent with the internal financial information used by management. The Company does not accumulate revenues by product classification and, therefore, it is impractical to present such information.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Distribution. </I>Includes the distribution of premium beverages and snacks in key markets. These markets include over 600 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. In addition to distributing the Company&rsquo;s own beverage products, the Company also distributes other products, including alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low-carb lemonade, healthy aloe juice drinks, and CBD-infused jellybeans, all of which complement the Company&rsquo;s current product offerings. The Distribution Segment includes all of Gold Leaf&rsquo;s operations.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>Beverage Products</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company&rsquo;s 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">HighDrate&rsquo;s CBD-infused energy water
is great tasting, sugar-free, and powered by the patented technology of Alkame Holdings Inc.&rsquo;s wholly-owned subsidiary, Alkame Water
Inc. (&ldquo;Alkame&rdquo;), 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 Level 2 &ndash; 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 technology can boost the immune system and physical performance.
HighDrate&rsquo;s CBD-infused energy water contains 80 mg of caffeine and 10 mg of CBD. The Company believes that CBD aids the body&rsquo;s
endocannabinoid system in neuroprotection, stress recovery, immune balance, and homeostatic regulation. HighDrate&rsquo;s CBD-infused
energy water is available in six flavors: watermelon, kiwi strawberry, tropical coconut, Georgia peach, sour apple, and blue island punch.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company&rsquo;s product &ldquo;Storm&rdquo;
is a high-alkaline CBD-infused water. This water is also powered by Alkame&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">OOH LA Lemin is lemonade for the modern age.
It is made natural and refreshing with no added sugar and is low in carbs and only 15 calories. OOH LA Lemin is available in four distinct
flavors: original lemonade, peach lemonade, strawberry lemonade, and blue raspberry lemonade.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company also sells branded apparel. The
Company uses only high-quality textiles and specialty inks and foils, which provide consumers with a premium fit and feel. The Company
currently offers shirts, tanks, hats, and towels for sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>Effects of COVID-19</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In January 2020, the World Health Organization
(the &ldquo;WHO&rdquo;) announced a global health emergency because of a new strain of coronavirus (&ldquo;COVID-19&rdquo;) that originated
in Wuhan, China and generated significant risks to the international community as the virus spread globally beyond its point of origin.
In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure. The COVID-19 pandemic
is disrupting businesses and affecting production and sales across a range of industries, as well as causing volatility in the financial
markets. The extent of the impact of the COVID-19 pandemic on the Company&rsquo;s consumer demand, sales, and financial performance will
depend on certain developments, including, among other things, the duration and spread of the outbreak and the impact on the Company&rsquo;s
consumers and employees, all of which are uncertain and cannot be predicted. Management is actively monitoring this situation and potential
impacts on our financial condition, liquidity, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 2 &ndash; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>A.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Basis of Presentation</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The accompanying consolidated financial statements
are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting
and in accordance with generally accepted accounting principles (&ldquo;GAAP&rdquo;) in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;<B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>B.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Use of Estimates</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The preparation of the consolidated financial
statements in conformity with GAAP 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>C.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Cash and Cash Equivalents</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>D.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Fair Value of Financial Instruments</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Level 1 &ndash; quoted prices in active markets
for identical assets or liabilities;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Level 2 &ndash; 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 can be corroborated
by observable market data for substantially the full term of the assets or liabilities; or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Level 3 &ndash; unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company analyzes all financial instruments
with features of both liabilities and equity under Accounting Standards Codification (&ldquo;ASC&rdquo;) 480, <I>Distinguishing Liabilities
from Equity,</I> and ASC 815, <I>Derivatives and Hedging </I>(&ldquo;ASC 815&rdquo;). Derivative liabilities are adjusted to reflect fair
value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair
value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall
fair value of the financial instruments. In addition, the fair value of free-standing derivative instruments such as warrant and option
derivatives are valued using the Black-Scholes models.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company uses Level 2 inputs for its valuation
methodology for the embedded conversion option liabilities as their fair value were determined by using the Black-Scholes option-pricing
model based on various assumptions. The Company&rsquo;s derivative liabilities are adjusted to reflect fair value at each period end,
with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>E.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Accounts Receivable and Allowance for Doubtful Accounts</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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. If the Company becomes aware of a specific distributor&rsquo;s
or reseller&rsquo;s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment of past
due accounts receivable outstanding. There was no bad debt attributed to accounts receivable in the year ended March 31, 2021 and 2020,
respectively. These amounts are included in selling, general and administrative expenses in the accompanying Consolidated Statements of
Loss. Management will review annually to determine provisions and record an allowance as deemed necessary. In the opinion of management,
a provision was deemed necessary for uncollectible accounts for Kona and no provision was deemed necessary for Gold Leaf. The balance
of allowance for Uncollectible Accounts at March 31, 2021 and December 31, 2020 were $3,967, respectively, as reflected in the accompanying
Consolidated Balance Sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>F.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Inventories</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The cost of inventory using the standard
cost method, which approximates actual cost based on a first-in, first-out method. The Company&rsquo;s inventories are valued at the lower
cost or net realizable value. The Company&rsquo;s inventory consists almost entirely of finished and unfinished goods, and freight, which
include CBD energy waters, CBD waters, hemp energy drinks, cans for production, and merchandise and apparel. The Company periodically
evaluates and adjusts 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 at December 31, 2020 and 2019, all inventory was current, as reflected in the accompanying
Consolidated Balance Sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>G.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Property, Plant and Equipment</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Property, plant and equipment are reported
on the accompanying Consolidated 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Depreciation is provided using the straight-line
method over the estimated useful lives of the asset as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Estimated useful lives (in years)</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 89%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Furniture and fixtures</FONT></TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 10%; font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">7</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Machinery and equipment</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">7</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Vehicles</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Computer equipment</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5 &ndash; 7</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>H.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Goodwill and Intangible Assets</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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
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 exist 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Management determined that, for the year
ending December 31, 2020, there were no identifiable assets or liabilities; therefore, the implied fair value of goodwill is zero. On
January 21, 2021, the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired
all of the capital stock of S and S Beverage Inc. (&ldquo;S and S&rdquo;). Because of this, goodwill was recorded in the amount of $1,275,938
see Note 4, <I>Goodwill and Intangible Assets</I>. Management determined that there was no impairment of trademarks for the year ending
December 31, 2020. See Note 4, <I>Goodwill and Intangible Assets</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>I.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Leases</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On January 1, 2019, the Company adopted the
Financial Accounting Standards Board&rsquo;s (&ldquo;FASB&rdquo;) Accounting Standards Update (&ldquo;ASU&rdquo;) 2016-02, <I>Leases (Topic
842)</I> (&ldquo;ASC Topic 842&rdquo;), which requires an entity to recognize a liability and corresponding asset for leases that meet
certain criteria. The Company applied ASC Topic 842 using the modified retrospective approach. Under this approach, the Company applied
the new standards to all new leases, and leases which have remaining obligations for financial statements issued for fiscal years beginning
after December 15, 2018. The Company elected the package of practical expedients permitted under the transition guidance, which allowed
the Company to carryforward historical lease classification, and not reassess (i) whether a contract was or contained a lease, and (ii)
initial direct costs for any leases that existed prior to January 1, 2019. Under this method, the Company did not restate comparative
periods in its financial statements. 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 Consolidated
Balance Sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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. The Company has elected to use the risk-free rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>J.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Revenue and Provision for Sales, Returns, and Allowances</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company sells
its products, which primarily includes its hemp energy drinks, CBD energy waters, CBD waters, and logo apparel, to online customers or
through resellers and distributors. In evaluating the timing of the transfer of control of products to customers, the Company considers
several indicators, including significant risks and rewards of products, the Company&rsquo;s 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company also sells its products, and
beverages purchased for resale from several other beverage manufacturers, to convenience stores, grocery stores, and smoke and gift shops.
In evaluating the timing of the transfer of control of products to customers, the Company considers several indicators, including significant
risks and rewards of products, the Company&rsquo;s 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On January 1, 2019, the Company adopted ASU
No. 2014-09, <I>Revenue from Contracts with Customers (Topic 606)</I> (&ldquo;ASC Topic 606&rdquo;). The underlying principle of ASC Topic
606 is to recognize revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation
of Topic ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">To apply these principles, ASC Topic 606
outlines a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying the contract(s) or agreement(s) with a customer;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying the separate performance obligations in the contract or agreement;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Determining the transaction price;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Allocating the transaction price to the separate performance obligations in the contract or agreement; and</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recognizing revenue as each performance obligation is satisfied.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to ASC Topic 606, the Company recognizes
revenue when performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control,
including the risks and rewards of ownership. With respect to the Company, performance is deemed to occur upon shipment or delivery of
products to its customers based on the written contract terms, which is also when control is transferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company evaluated
the guidance in ASC 606-10-50-5 and the related implementation guidance to determine disaggregation of revenues that would be meaningful.
The majority of the Company&rsquo;s revenue earned from its Beverages Segment and its Distribution Segment is recognized when it satisfies
a single performance obligation by transferring control of its products to a customer. The Company does not have significant financing
component or payment terms, and it does not have any material unsatisfied performance obligations. The Company&rsquo;s revenues are obtained
in similar geographical locations within the United States. Furthermore, the Company&rsquo;s operations in each of its reporting segments
are expected to have essentially the same future prospects, similar gross margins, sales trends, and the nature of its products and customers
are essentially the same. The sales from the Company&rsquo;s beverage product types are organized as one reportable segment, which the
Company refers to as the Beverages Segment, and the sales of the Company&rsquo;s products and products that are purchased from resellers
that are distributed by Gold Leaf is organized as its second reportable segment, which the Company refers to as the Distribution Segment.
The Company has also determined that disaggregated revenue by net sales by revenue source would be meaningful and allow investors to understand
its business activities, historical performance, or future prospects. Disaggregated sales by revenue source, which includes sales to distributors,
online sales, sales through Amazon, and Gold Leaf distribution sales, is included in Note 16, <I>Revenue</I>, to the Consolidated Financial
Statements. We also sell merchandise and apparel that comprises approximately 1% of the Company&rsquo;s gross annual sales, and solely
exists to promote its beverages. Therefore, the Company&rsquo;s merchandise and apparel products are not a reportable segment. Merchandise
and apparel sales are included with the gross sales for its Beverages Segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 return, and allowance at the three months ending March 31, 2021 and 2020 of approximately $15,034 and $44,965, respectively, which
is included in the revenues, net of sales returns and allowances in the accompanying Consolidated Statements of Loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>K.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Cost of Revenues</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Cost of revenues consist primarily of expenses
associated with the delivery and distribution of products. 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 revenues. The costs are charged to cost of revenues in the same period that the associated revenue is earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>L.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Impairment of Long-Lived Assets</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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, 2020 and determined long-lived assets were not impaired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>M.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Income Taxes</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company accounts for income taxes in
accordance with FASB ASC 740, <I>Income Taxes, </I>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 &ldquo;more likely than not&rdquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has no recorded liabilities for
uncertain tax positions as of the accompanying Consolidated Balance Sheets dated March 31, 2021 and December 31, 2020, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>N.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Stock-Based Compensation</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">FASB&rsquo;s ASC Topic 718, <I>Stock Compensation</I>
(formerly, FASB Statement 123R) (&ldquo;ASC Topic 718&rdquo;), 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&rsquo;s common stock, par value $0.00001 per share (the &ldquo;Common Stock&rdquo;),
on the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company estimates the fair value of each
restricted stock award as of the date of grant using the closing price as reported by the OTC Markets Group Inc. (the &ldquo;OTCM&rdquo;)
on the date of grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which
an employee is required to provide service in exchange for the award. The Company accounts for forfeitures of restricted stock as they
occur.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>O.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Advertising Costs</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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, 2021 and 2020, were approximately $10,300 and $12,300,
respectively, which amounts were included in selling, general and administrative expenses in the accompanying Consolidated Statements
of Loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>P.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Concentration of Credit Risk</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company maintains 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Q.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Basic and Diluted Earnings per Share</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In accordance with FASB&rsquo;s ASC 260,
<I>Earnings per Share</I>, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Diluted per-share loss is the same as basic
per-share loss when there is a loss from continuing operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>R.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Segments</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">ASC 280-10, <I>Segment Reporting</I> (&ldquo;ASC
280-10&rdquo;), establishes standards for reporting information regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes
standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of
an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or
decision-making group, in making decisions how to allocate resources and assess performance. The Company identified two operating segments
that report revenue, including both sales to external customers and intersegment sales or transfers, that are 10% or more of the combined
revenue, internal and external, of all the Company&rsquo;s operating segments. Furthermore, each of the operating segments have assets
that are 10% or more of the combined assets of all operating segments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company then applied the management approach
to the identification of its two reportable segments &ndash; the Beverages Segment, consisting of the operations of Kona, HighDrate, and
S and S, and the Distribution Segment, consisting of the operations of Gold Leaf. Specifically, the Company has evaluated guidance in
ASC 280-10 and determined that aggregation is consistent with the objectives of ASC 280-10 in that aggregation into two reportable segments
allows users of our financial statements to view the Company&rsquo;s business through the eyes of management based upon the way management
reviews performance and makes decisions. Additional factors that were considered included: whether or not an operating segment has similar
economic characteristics, the nature of the products/services under each operating segment, the nature of the production/go-to-market
process, the type and geographic location of our customers, and the distribution of our products/services. The Company further determined
that its logo merchandise and apparel, which revenue comprises approximately 1% of the Company&rsquo;s gross annual sales, and solely
exists for promotion purposes, could be aggregated with the operations in the Beverages Segment. A description of the Company&rsquo;s
products is contained in Note 1, <I>Organization and Description of Business. </I>For additional information regarding the Company&rsquo;s
two reportable segments, please see Note 17, <I>Segments.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>S.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Registration Rights Agreement</B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In May 2020, the Company completed a private
placement transaction (the &ldquo;2020 Private Placement&rdquo;) of three secured convertible debentures (the &ldquo;2020 Debentures&rdquo;),
convertible for up to 105,947,397 shares (the &ldquo;2020 Conversion Shares&rdquo;) of Common Stock and a Warrant to purchase Common Stock
(the &ldquo;2020 Warrant&rdquo;), exercisable for up to 20,000,000 shares of Common Stock (the &ldquo;2020 Warrant Shares&rdquo;), pursuant
to that certain Securities Purchase Agreement between an otherwise unaffiliated third-party investor (the &ldquo;Selling Stockholder&rdquo;)
and the Company, dated as of May 14, 2020 (the &ldquo;2020 SPA&rdquo;). The Company sold and issued the initial 2020 Debenture (the &ldquo;First
2020 Debenture&rdquo;) and granted the Warrant promptly after entering in the 2020 SPA. The Company sold and issued the second 2020 Debenture
(the &ldquo;Second 2020 Debenture&rdquo;) promptly after filing the registration statement on Form S-1 (the &ldquo;2020 Registration Statement&rdquo;)
with the Securities and Exchange Commission (the &ldquo;SEC&rdquo;). The Company sold and issued the third 2020 Debenture (the &ldquo;Third
2020 Debenture&rdquo;) promptly after the SEC declared the Registration Statement effective. The Company agreed to register the 2020 Conversion
Shares and 2020 Warrant Shares pursuant to the terms of the Registration Rights Agreement between the Selling Stockholder and Company,
dated as of May 14, 2020 (the &ldquo;2020 Registration Rights Agreement&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the terms of the Registration
Rights Agreement, the Company agreed to file the 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. Further, the Company agreed to use its best
efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the effectiveness
deadline, or by the 5<SUP>th</SUP> trading day following the date on which the Company is notified that the Registration Statement will
not be reviewed or is no longer subject to further review and Pursuant to the terms of the 2020 Registration Rights Agreement, the Company
agreed to file the 2020 Registration Statement with the SEC registering for resale the 2020 Conversion Shares and the 2020 Warrant Shares
within 45 calendar days following the closing of the 2020 Private Placement. Further, the Company agreed to use its best efforts to have
the 2020 Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline,
or by the 5<SUP>th</SUP> trading day following the date on which the Company is notified that the 2020 Registration Statement will not
be reviewed or is no longer subject to further review and comments. Pursuant to the 2020 Registration Rights Agreement, the Company is
subject to partial liquidated damages equal to 2.0% of the aggregate purchase price paid by the holder pursuant to the 2020 SPA for any
of the 2020 Debentures then held by the holder for failure to file the 2020 Registration Statement timely, failure to file with the SEC
a request for acceleration in accordance with Rule 461 promulgated under the Securities Act of 1933, as amended (the &ldquo;Securities
Act&rdquo;), within five trading days after the date the Company is notified that the 2020 Registration Statement will not be reviewed
or is not subject to further review, the 2020 Registration Statement is not declared effective by the effectiveness deadline, if after
effectiveness, the 2020 Registration Statement ceases for any reason to remain continuously effective as required or if the holders are
not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an aggregate of 40 calendar
days during any 12-month period, or if after the six-month anniversary of the 2020 Registration Rights Agreement, the Company does not
have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum aggregate liquidated
damages payable to a holder of the 2020 Debentures under the 2020 Registration Rights Agreement is 24% of the aggregate purchase price
paid by such holder pursuant to the 2020 SPA. The Selling Stockholder has agreed to waive this 30-consecutive-calendar-day provision for
so long as the Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and
promptly thereafter files a Post-Effective Amendment to the 2020 Registration Statement, both of which the Company accomplished.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company accounts for registration rights
agreements in accordance with ASC subtopic 825-20, <I>Registration Payment Arrangements </I>(&ldquo;ASC 825-20&rdquo;). Under ASC 825-20,
the Company is required to disclose the nature and terms of the arrangement, the maximum potential amount and to assess each reporting
period the probable liability under these arrangements and, if exists, to record or adjust the liability to current period operations.
ASC 825-20 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision of a financial instrument, should be separately recognized
and accounted for as a contingency in accordance with ASC 450-20, <I>Loss Contingencies</I>. The Company recorded no amount for this contingency
in other expenses for the year ended December 31, 2020. As a result, there was no contingency recorded as a liability as a component of
accrued expenses as of December 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In February 2021, the Company completed an
additional private placement transaction (the &ldquo;2021 Private Placement&rdquo;) of two secured convertible debentures (the &ldquo;2021
Debentures&rdquo;), convertible for up to 154,958,678 shares (the &ldquo;2021 Conversion Shares&rdquo;) of Common Stock and granted a
Warrant to purchase Common Stock (the &ldquo;2021 Warrant&rdquo;), exercisable for up to 50,000,000 shares of Common Stock (the &ldquo;2021
Warrant Shares&rdquo;), pursuant to that certain Securities Purchase Agreement between the Selling stockholder and the Company, dated
as of February 10, 2021 (the &ldquo;2021 SPA&rdquo;). The Company sold and issued the initial 2021 Debenture (the &ldquo;First 2021 Debenture&rdquo;)
and granted the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second 2021 Debenture (the &ldquo;Second
2021 Debenture&rdquo;) promptly after the SEC declares effective the 2021 Registration Statement (as defined below).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Debentures are due 12 months from
their respective issuance dates and are secured by all of the Company&rsquo;s assets and the assets of each of its subsidiaries pursuant
to that certain Security Agreement by and among the Selling Stockholder, the Company&rsquo;s subsidiaries, and the Company. Initially,
the 2021 Debentures are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the
&ldquo;2021 Fixed Conversion Price&rdquo;), or (ii) 80% of the lowest daily volume weighted average price (&ldquo;VWAP&rdquo;) of our
Common Stock during the 15 trading days immediately preceding the conversion date, subject to adjustment (the &ldquo;2021 Market Conversion
Price&rdquo;). The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if
the Company issues shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the
2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and
similar events will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a
&ldquo;conversion blocker&rdquo; such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result
in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following
such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures
or exercise of the 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that
4.99% &ldquo;conversion blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice to the Company. The 2021 Debentures
accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder
converts the 2021 Debentures or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable
either in cash or, if certain Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock
at the 2021 Market Conversion Price on the trading day immediately prior to the date paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">At the Company&rsquo;s option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity
dates; provided, that, as of the date of the holder&rsquo;s receipt of the redemption notice, (i) the VWAP of the Common Stock is less
than the 2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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 &ldquo;Redemption Premium&rdquo;). The Company must provide the holder
15 business days&rsquo; advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock
equivalents at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an &ldquo;original issue discount.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In connection with the 2021 Private Placement,
the Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has
a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails
to maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default
(as defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a &ldquo;cashless&rdquo; basis. &ldquo;Event
of Default&rdquo; means an event of default under the 2021 SPA or the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Warrant is subject to an &ldquo;exercise
blocker&rdquo; such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% &ldquo;exercise blocker&rdquo;
to 9.99% upon at least 65 days&rsquo; prior written notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the terms of the 2021 Registration
Rights Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the &ldquo;2021 Registration
Statement&rdquo;) with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>T.</B></FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B><U>Recently Issued Accounting Pronouncements</U></B></FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-indent: -18pt"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has evaluated all recently issued
accounting pronouncements, issued or proposed, by the FASB or other standards-setting bodies as of the period ending March 31, 2021. The
Company does not expect a material impact on the Company&rsquo;s financial position, result of operations, or cash flows from these pronouncements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 2 &ndash; INVENTORY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Inventory consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: center; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">March
    31, 2021</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December
    31, 2020</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">CBD
    Energy Water</FONT></TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">147,199</FONT></TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="width: 8%; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="width: 12%; font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">159,813</FONT></TD><TD STYLE="width: 1%; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Hemp
    Energy Drink</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">303,918</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">343,119</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Storm
    CBD Water</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">29,938</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">28,692</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ooh
    La Lemin Drink</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">165,966</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&mdash;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Merchandise
    and Apparel</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">12,149</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">11,948</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unfilled
    Cans, Trays and Sleeves</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">108,788</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">38,705</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Miscellaneous
    Beverages</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">32,177</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">33,225</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Other
    Inventory</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">59,877</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">43,362</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font: 10pt Times New Roman, Times, Serif; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Point
    of Sale Inventory</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1,640</FONT></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-bottom: 1pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; font: 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1,640</FONT></TD><TD STYLE="padding-bottom: 1pt; font: 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total
    Inventory</FONT></TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">861,652</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD><TD STYLE="font: bold 10pt Times New Roman, Times, Serif; padding-bottom: 2.5pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font: bold 10pt Times New Roman, Times, Serif; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">660,504</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font: bold 10pt Times New Roman, Times, Serif; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 3 &ndash; PROPERTY, PLANT AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Property, plant and equipment consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; text-align: left; text-indent: -10pt">Furniture and Fixtures</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">66,154</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">57,879</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Computers and Software</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,855</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,638</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Machinery &amp; Equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,456</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">79,951</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">Vehicles</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,135</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">68,135</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Less: Accumulated Depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(64,638</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(54,731</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Property, plant and equipment, net</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">176,962</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">167,872</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Depreciation for the three months ended March
31, 2021 and 2020, was approximately $9,907 and $7,673 respectively, and is included in selling, general and administrative expenses in
the accompanying Consolidated Statements of Loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>NOTE
4 &ndash; GOODWILL AND INTANGIBLE ASSETS</B></FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In April 2019, Gold Leaf acquired 21,000,000
shares, representing all of the issued and outstanding shares of common stock, $0.01 par value per share, of BigSupersearch.com, Inc.,
a California corporation (&ldquo;BigSupersearch&rdquo;), and 14,000,000 shares of its Series A preferred stock, for $61,000, which amount
included the purchase price, attorney fees, and transfer fees. At the time of the acquisition, BigSupersearch was considered a &ldquo;shell
company&rdquo; because it had no operations and no assets. Because no transfer of assets or liabilities occurred, the entire $61,000,
representing the consideration paid for all of the issued and outstanding capital stock of BigSupersearch, was recorded as goodwill. Gold
Leaf has not commenced operations or done anything with BigSupersearch and it still remains a shell company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 Company uses a 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">At December 31, 2019, BigSupersearch 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 BigSupersearch exceeded its carrying value, including goodwill. In accordance with the Qualitative Assessment outlined in ASC
350-20-35, <I>Goodwill &ndash; Subsequent Measurement </I>(&ldquo;ASC 350-20-35&rdquo;)<I>, </I>an entity has an unconditional option
to bypass the qualitative assessment and proceed directly to performing the first step of the goodwill impairment test.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 than zero and its fair value exceeds its carrying amount, then
there is no impairment and the second step is not necessary. If the carrying amount of BigSupersearch exceeds the fair value, then goodwill
will be measured for impairment in the second step. The amount of impairment loss recorded is the difference in the excess of the carrying
amount over its fair value.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Management determined that for the year ending
December 31, 2019, BigSupersearch had 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, 2020, the Company had $0 in goodwill.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On January 21, 2021,
the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired all of the capital
stock of S and S Beverage Inc. (&ldquo;S and S&rdquo;). To consummate the Acquisition, a Certificate of Merger with the Wisconsin Department
of Financial Institutions (the &ldquo;Merger Certificate&rdquo;) on February 1, 2021. On January 22, 2021, (i) Kona Gold, (ii) KGS Temporary
Company, Inc. (the &ldquo;Acquisition Subsidiary&rdquo;), (iii) S and S, (iv) William J. Stineman and K&amp;L Beverage, LLC, a Wisconsin
limited liability company (as the indemnifying S and S shareholders), and (v) Mr. Stineman (as representative of the S and S Shareholders)
entered into the Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;). S and S merged with and into our Acquisition Subsidiary;
S and S was the surviving entity and became our wholly-owned subsidiary of Kona Gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><FONT STYLE="background-color: white">Pursuant
to the Merger Agreement, and subject to the terms and conditions contained therein,&nbsp;</FONT>we acquired all of the shares of capital
stock of S and S from the five holders thereof (the &ldquo;S and S Legacy Shareholders&rdquo;). In consideration thereof, we issued to
them an aggregate of nine million restricted shares of our common stock (the &ldquo;Acquisition Stock&rdquo;) on a pro rata basis. We
did not grant them any registration rights in respect of the shares of Acquisition Stock. We also agreed to pay an aggregate of $1,050,000
(the &ldquo;Aggregate Acquisition Payments&rdquo;), the majority of which is allocated to certain creditors of S and S (including one
of the S and S Legacy Shareholders) and approximately $89,000 of which (the &ldquo;Remaining Acquisition Payments&rdquo;) is allocated
to the S and S Legacy Shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid within approximately
two weeks of the closing. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled
to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent
to $2.00 per case of Lemin Superior Lemonade, OOH LA Lemin (the product line of S and S) that we sell until the Aggregate Acquisition
Payments have been paid in full. In addition to the Aggregate Acquisition Payments, we also assumed and agreed to pay certain other liabilities
of S and S as set forth in the Merger Agreement. Because of this goodwill was recorded in the amount of $1,275,938, see Note 18 &ndash;
<I>Acquisition of S and S Beverage, Inc.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Changes in goodwill are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">December 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Beginning of year</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; text-align: left">Acquired goodwill</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">1,275,938</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding-bottom: 1pt">Impairment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total goodwill</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">1,275,938</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Intangible asset consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; text-align: left">Trademark (HighDrate)</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">81,750</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">81,750</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Website Development (Ooh La Lemin)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,201</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Accumulated Amortization</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(14,510</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(12,262</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Total Intangible Asset</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">79,441</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">69,488</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Estimated future amortization expense related to the intangible
asset is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: left">Fiscal year ending:</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 64%; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2021 (remaining 9 months)</FONT></TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 23%; text-align: right">7,046</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2022</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,395</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2023</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,395</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2024</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,395</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2025</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,395</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Thereafter</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">34,815</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">79,441</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 5 &ndash; NOTE RECEIVABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On May 26, 2016, Robert Clark, formed Elev8
Hemp, LLC, a Delaware limited liability company (&ldquo;Elev8 Hemp&rdquo;), on behalf of Ryan Medico, the Company&rsquo;s then-Chief Financial
Officer. Mr. Medico was the sole owner of and served as President of Elev8 Hemp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In June 2016, the Company entered into a
letter of intent with Elev8 Hemp to acquire it, such that it would become the Company&rsquo;s wholly-owned subsidiary. Pursuant to the
letter of intent, on June 7, 2016, the Company entered into an Acquisition Agreement with Elev8 Hemp (the &ldquo;Elev8 Hemp Acquisition
Agreement&rdquo;), whereby the Company agreed to acquire 100% of the ownership of Elev8 Hemp and, in exchange, the Company agreed to issue
to Mr. Medico five million restricted shares of the Common Stock, which had a fair market value of $50,000. The Elev8 Hemp Acquisition
Agreement provided that if the Company failed to adequately capitalize the development of Elev8 Hemp to complete its objectives set forth
in its business plan, then Mr. Medico would have the option until March 31, 2018 to purchase Elev8 Hemp from the Company for a purchase
price of $50,000, which could be paid in shares of the Company&rsquo;s Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On October 10, 2016, the Company entered
into a Membership Interest Purchase Agreement (the &ldquo;Membership Interest Purchase Agreement&rdquo;) with Elev8 Hemp, as the Company&rsquo;s
wholly-owned subsidiary, and Branded Legacy, Inc., formerly known as Elev8 Brands, Inc. and, prior to that, known as PLAD, Inc. (&ldquo;Branded
Legacy&rdquo;), to sell 100% of the then-issued and outstanding membership interests of Elev8 Hemp to Branded Legacy in consideration
of its issuance to the Company of 200,000,000 shares of its common stock, par value $0.00001. In connection with this transaction, Mr.
Medico became the Chief Executive Officer and the sole director of Branded Legacy. The parties desired to enter into the Membership Interest
Purchase Agreement because the Company did not have adequate capital to fund the development of Elev8 Hemp&rsquo;s business, as well as
its own. Until July 2018, Mr. Medico also continued to serve as the Company&rsquo;s Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On April 14, 2017, the Company&rsquo;s Board
of Directors (the &ldquo;Board&rdquo;) declared a dividend to its stockholders of an aggregate of 53,196,608 shares of common stock of
Branded Legacy. The Company&rsquo;s stockholders received one share of common stock of Branded Legacy for every 10 shares of the Company&rsquo;s
Common Stock held on the record date. On the record date, we had approximately 104 stockholders, all of whom received this dividend. After
the payment of the dividend, the Company held 146,803,392 shares of common stock of Branded Legacy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On March 6, 2018, the Company entered into
a Securities Exchange and Settlement Agreement (the &ldquo;First Exchange Agreement&rdquo;) with Branded Legacy. Pursuant to the First
Exchange Agreement, the Company exchanged with Branded Legacy the remaining 146,803,392 shares of common stock held by the Company for
2,746,723 shares of Branded Legacy&rsquo;s 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. At December 31, 2018, the balance of the investment in Branded Legacy was $1,648.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On November 26, 2019, we entered into a second
Securities and Exchange Agreement with Branded Legacy, whereby we exchanged the remaining investment of 2,746,723 shares of Branded Legacy&rsquo;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 &ldquo;Branded Legacy Note&rdquo;). All principal and accrued and unpaid interest on the Branded Legacy Note is payable,
in full, on November 27, 2029. As of the dates of the foregoing transactions, the Company and Branded Legacy were not considered related
parties based upon the guidance set forth in ASC Topic 850, <I>Related Party Disclosures</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Management could not ascertain with certainty
of the collectability of the Branded Legacy Note due to the dollar amount and duration of the term; therefore, an allowance for $1,500,000
had been assessed and expensed, which was included in the Consolidated Statements of Loss for the year ended December 31, 2019. The Branded
Legacy Note and the investment in Branded Legacy consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
<TD STYLE="text-align: center">&nbsp;</TD>
<TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD>
<TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
<TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2020</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
<TD STYLE="text-align: left">Investment in Branded Legacy</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: left">$</TD>
<TD STYLE="text-align: right">&mdash;</TD>
<TD STYLE="text-align: left">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD STYLE="text-align: left">$</TD>
<TD STYLE="text-align: right">&mdash;</TD>
<TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
<TD STYLE="width: 56%; text-align: left">Note receivable</TD>
<TD STYLE="width: 8%">&nbsp;</TD>
<TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
<TD STYLE="width: 12%; text-align: right">1,500,000</TD>
<TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
<TD STYLE="width: 8%">&nbsp;</TD>
<TD STYLE="width: 1%; text-align: left">&nbsp;</TD>
<TD STYLE="width: 12%; text-align: right">1,500,000</TD>
<TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
<TD STYLE="text-align: left; padding-bottom: 1pt">Less: Allowance for doubtful account</TD>
<TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,500,000</TD>
<TD STYLE="padding-bottom: 1pt; text-align: left">)</TD>
<TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD>
<TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,500,000</TD>
<TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
<TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: 0pt">Note receivable, net</TD>
<TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&mdash;</TD>
<TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD>
<TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD>
<TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">&mdash;</TD>
<TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 6 &ndash; STOCK-BASED COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company&rsquo;s directors, officers,
key employees, and non-employees were granted stock-based compensation consisting of restricted stock awards. Stock-based compensation
is measured at the grant date, based on the fair value of the award, and is recognized as an expense at the date of issuance. The Company
estimates the fair value of each restricted stock award as of the date of grant using closing price as reported by the OTCM on the date
of grant. The Board has not adopted any employee stock purchase plans or other incentive plans, nor does the Company grant stock options
to its directors, officers, and employees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The share-based payments granted for the
three months ended March 31, 2021 and the year ended December 31, 2020, were 9,000,000 and 10,085,140 shares of the Common Stock, respectively.
No stock-based Common Stock was cancelled or forfeited for the three months ended March 31, 2021 and the year ended December 31, 2020,
respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">For the three months ended March 31, 2021
and 2020, the Company recognized stock-based compensation expense, which is included in selling, general and administrative expenses in
the accompanying Consolidated Statements of Loss, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">Three Months Ended March 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">Three Months Ended March 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; text-align: left; text-indent: -10pt">Employee stock awards</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">&mdash;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">318,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Non-employee stock awards</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">270,900</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total stock-based compensation expense</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">270,900</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">318,500</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company expenses stock-based compensation
cost in the current period at the grant date. No future years of compensation is expected for the next five fiscal years. The Company
has a balance in accrued stock-based compensation at March 31, 2021 and December 31, 2020, of $1,386,497 and $1,386,497, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 7 &ndash; LINE OF CREDIT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On May 5, 2018, Kona entered into a Line
of Credit Agreement with Matthew Nicoletti as the lender, which established a revolving line of credit in the amount of up to $400,000.
The line of credit matures on May 5, 2022 and is reflected as non-current on the accompanying Consolidated Balance Sheets. Advances under
the line of credit bear interest at the rate of 3.75 percent per annum. Payments of principal and accrued interest are payable on the
maturity date. At March 31, 2021 and December 31, 2020, the line of credit had an outstanding principal balance of $398,470, respectively,
and accrued interest of $35,787 and $32,102, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 8 &ndash; RELATED PARTY TRANSACTIONS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-term debt consists of two note payables with a related party:</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On October 31, 2018, Kona
    issued a Standard Promissory Note in favor of Robert Clark, as lender, in the original principal amount of $20,000. Mr. Clark is
    the Company&rsquo;s President, Chief Executive Officer, Secretary, and Chairman of the Board. The note bears no interest. Principal
    payments of $500 per month commenced in February 2019, with the final payment due in April 2021. The outstanding principal balance
    of this note at March 31, 2021 and December 31, 2020 was $7,000 and $8,500, respectively. <I>See,</I> Note 21 &ndash; Subsequent
    Events.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On February 19, 2019, Gold Leaf issued a Standard Promissory Note in Favor of Robert Clark, as lender, in the original principal amount of $70,000. The note bears no interest. Principal payments of $500 per month commenced in March 2019, with final payment due in March 2021. On March 15, 2021, Gold Leaf issued an Amendment to the original issued Standard Promissory Note in Favor of Robert Clark for the remaining outstanding principle of $58,000. Principal payment of $500 per month, with final payment due in March 2022. The outstanding principal balance of this note at March 31, 2021 and December 31, 2020 was $58,000 and $59,500, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt">The future maturities are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2021(remaining 9 months)</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">65,000</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>$</B></FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>65,000</B></FONT></TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Lines of credit consists of two agreements with a related party:</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On April 4, 2019, Kona
    entered into a Line of Credit Agreement with Robert Clark. The agreement established a revolving line of credit in the amount of
    up to $1,500,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures
    on April 4, 2021, at which time all outstanding principal amounts and accrued interest are due and payable. At March 31, 2021 and
    December 31, 2020, outstanding principal was $1,372,651 and $1,369,651, respectively, and accrued interest was $48,757 and $36,397,
    respectively. <I>See,</I> Note 21 &ndash; Subsequent Events.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On August 29, 2019, Gold Leaf entered into a Line of Credit Agreement with Robert Clark. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on August 29, 2021, at which time all outstanding principal amounts and accrued interest are due and payable. At March 31, 2021 and December 31, 2020, outstanding principal was $125,500 and $100,000, respectively, and accrued interest was $4,706 and $3,545, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: -36pt"><B>&nbsp;NOTE 9 &ndash;
SECURITIES PURCHASE AGREEMENT, DERIVATIVE LIABILITIES, AND WARRANT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; text-indent: -36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>2020 Securities Purchase Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In May 2020, the Company completed the 2020
Private Placement of the 2020 Debentures and the 2020 Warrant pursuant to the 2020 SPA. The Company sold and issued the First 2020 Debenture
and granted the 2020 Warrant promptly after entering in the 2020 SPA. The Company sold and issued the Second 2020 Debenture promptly after
filing the 2020 Registration Statement initially with the SEC. The Company sold and issued the Third 2020 Debenture promptly after the
SEC declared the Registration Statement effective. The 2020 Debentures are due 12 months from their respective issuance dates and are
secured by all of the Company&rsquo;s assets and the assets of each of its subsidiaries pursuant to that certain Security Agreement by
and among the Selling Stockholder, the Company&rsquo;s subsidiaries, and the Company. Initially, the 2020 Debentures are convertible at
the lower of (i) the fixed conversion price, which is $0.05 per share, subject to adjustment (the &ldquo;2020 Fixed Conversion Price&rdquo;),
or (ii) 80% of the lowest daily volume weighted average price (&ldquo;VWAP&rdquo;) of our Common Stock during the 15 trading days immediately
preceding the conversion date, subject to adjustment (the &ldquo;2020 Market Conversion Price&rdquo;). The 2020 Debentures contain an
adjustment provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of its Common Stock
or common stock equivalents at a price lower than the then-current conversion</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">price of the 2020 Debentures. Any stock splits, reverse
stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment
of the conversion price of the 2020 Debentures. The 2020 Debentures are subject to a &ldquo;conversion blocker&rdquo; such that the Selling
Stockholder cannot convert any portion of the 2020 Debentures that would result in the Selling Stockholder and its affiliates holding
more than 4.99% of the then-issued and outstanding shares of the Common Stock following such conversion (excluding, for purposes of such
determination, shares of the Common Stock issuable upon conversion of the 2020 Debentures or exercise of the 2020 Warrant that had not
then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% &ldquo;conversion blocker&rdquo; to 9.99%
upon at least 65 days&rsquo; prior written notice to the Company. The 2020 Debentures accrue interest at an annual rate equal to 8% and
are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the 2020 Debentures or otherwise
accelerates the maturity date, as provided for in the 2020 Debentures). Interest is payable either in cash or, if certain Equity Conditions
(as defined in the 2020 Debentures) are then satisfied, in shares of the Common Stock at the 2020 Market Conversion Price on the trading
day immediately prior to the date paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">At the Company&rsquo;s option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2020 Debentures prior to their respective maturity
dates; <I>provided</I>, <I>that</I>, as of the date of the holder&rsquo;s receipt of the redemption notice, (i) the VWAP of the Common
Stock is less than the 2020 Fixed Conversion Price, initially $0.05 per share, and (ii) there is no Equity Conditions failure. The Company
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 &ldquo;Redemption Premium&rdquo;). The Company must provide
the holder 15 business days&rsquo; advance notice of its intent to make a redemption, setting forth the amount of principal and interest
we desire then to redeem plus the applicable Redemption Premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2020 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of the Common Stock or common
stock equivalents at a price lower than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits,
recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the
conversion price of the 2020 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the terms of the Registration
Rights Agreement, the Company agreed to file the Registration Statement with the SEC registering for resale the Conversion Shares and
the Warrant Shares within 45 calendar days following the closing of the 2020 Private Placement. The Company also agreed, among other things,
to indemnify the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by the Company in connection with
the registration of the Conversion Shares and the Warrant Shares held by the Selling Stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2020 SPA, the purchase price
for the First 2020 Debenture was $250,000, less $15,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $10,000 and $5,000 as a structuring fee. On December 23, 2020, the Company converted $100,000 of the principal of, and $12,274 of accrued
interest on, the First 2020 Debenture into 8,255,438 shares of the Company&rsquo;s common stock. On January 25, 2021, the Company converted
$150,000 of the principal of, and $1,118 of accrued interest on, the First 2020 Debenture into 7,094,732 shares of the Company&rsquo;s
common stock, see Note 11, <I>equity transactions</I>. At March 31, 2021, no balance remains on the principal balance of the First 2020
Debenture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2020 SPA, the purchase price
for the Second 2020 Debenture was $250,000, less $10,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $10,000 fee. On January 25, 2021, the Company converted $100,000 of the principal of, and $10,410 of accrued interest on, the Second
2020 Debenture into 5,183,613 shares of the Company&rsquo;s common stock. On February 19, 2021, the Company converted $150,000 of the
principal of, and $855 of accrued interest on, the Second 2020 Debenture into 7,252,634 shares of the Company&rsquo;s common stock see
Note 11, <I>equity transactions</I>. At March 31, 2021, no balance remains on the principal balance of the First 2020 Debenture.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2020 SPA, the purchase price
for the Third 2020 Debenture was $500,000, less $10,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $10,000 fee. On January 12, 2021, the Company converted $200,000 of the principal of, and $1,425 of accrued interest on, the First
2020 Debenture into 10.887,819 shares of the Company&rsquo;s common stock, see Note 11, <I>equity transactions</I>. At March 31, 2021,
the principal balance of the Third 2020 Debenture is $300,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>2021 Securities Purchase Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In February 2021, the Company completed a
private placement transaction (the &ldquo;2021 Private Placement&rdquo;) with the Selling Stockholder of two secured convertible debentures
(the &ldquo;2021 Debentures&rdquo;), convertible for up to 154,958,678 shares (the &ldquo;2021 Conversion Shares&rdquo;) of Common Stock
and granted a Warrant to purchase Common Stock (the &ldquo;2021 Warrant&rdquo;), exercisable for up to 50,000,000 shares of Common Stock
(the &ldquo;2021 Warrant Shares&rdquo;), pursuant to that certain Securities Purchase Agreement between the Selling stockholder and the
Company, dated as of February 10, 2021 (the &ldquo;2021 SPA&rdquo;). The Company sold and issued the initial 2021 Debenture (the &ldquo;First
2021 Debenture&rdquo;) and granted the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second
2021 Debenture (the &ldquo;Second 2021 Debenture&rdquo;) promptly after the SEC declares effective the 2021 Registration Statement (as
defined below). On May 5, 2021, the Company and the Selling Stockholder entered into a Limited Amendment Agreement, pursuant to which
we agreed to a partial Second Closing, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture
in the face amount of $200,000 for a purchase price of $192,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Debentures are due 12 months from
their respective issuance dates and are secured by all of the Company&rsquo;s assets and the assets of each of its subsidiaries pursuant
to that certain Security Agreement by and among the Selling Stockholder, the Company&rsquo;s subsidiaries, and the Company. Initially,
the 2021 Debentures are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the
&ldquo;2021 Fixed Conversion Price&rdquo;), or (ii) 80% of the lowest daily volume weighted average price (&ldquo;VWAP&rdquo;) of our
Common Stock during the 15 trading days immediately preceding the conversion date, subject to adjustment (the &ldquo;2021 Market Conversion
Price&rdquo;). The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if
the Company issues shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the
2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and
similar events will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a
&ldquo;conversion blocker&rdquo; such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result
in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following
such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures
or exercise of the 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that
4.99% &ldquo;conversion blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice to the Company. The 2021 Debentures
accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder
converts the 2021 Debentures or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable
either in cash or, if certain Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock
at the 2021 Market Conversion Price on the trading day immediately prior to the date paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">At the Company&rsquo;s option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity
dates; provided, that, as of the date of the holder&rsquo;s receipt of the redemption notice, (i) the VWAP of the Common Stock is less
than the 2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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 &ldquo;Redemption Premium&rdquo;). The Company must provide the holder
15 business days&rsquo; advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock
equivalents at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an &ldquo;original issue discount.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In connection with the 2021 Private Placement,
the Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has
a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails
to maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default
(as defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a &ldquo;cashless&rdquo; basis. &ldquo;Event
of Default&rdquo; means an event of default under the 2021 SPA or the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2021 Warrant is subject to an &ldquo;exercise
blocker&rdquo; such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% &ldquo;exercise blocker&rdquo;
to 9.99% upon at least 65 days&rsquo; prior written notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the terms of the 2021 Registration
Rights Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the &ldquo;2021 Registration
Statement&rdquo;) with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo;
of $36,000 and $5,000 as a structuring fee. At March 31, 2021, the principal balance of the First 2021 Debenture is $900,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt"><I>Derivative Liability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2020 and 2021 Debentures have been accounted
for utilizing ASC 815. The Company has incurred a liability for the estimated fair value of the First 2020 Debenture. The estimated fair
value of the 2020 Debentures has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided
by management, as of the date of issuance, with the valuation offset against additional paid in capital, and at each reporting date, with
changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company identified embedded features in
the 2020 and 2021 Debentures, which caused the 2020 and 2021 Debentures to be classified as a liability. These embedded features included
the right for the holder to request for the Company to settle the amounts owed pursuant to the 2020 and 2021 Debentures to the holder
by paying an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the 2020 and 2021 Debentures on the
date of the consummation of a fundamental transaction. The accounting treatment of derivative financial instruments requires that the
Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of
the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The derivative liabilities were valued using
Black-Scholes pricing model with the following average assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31,&nbsp;2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 70%">Stock Price</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">0.0327</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Exercise Price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.0276</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected Life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99.5</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Dividend Yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk-Free Interest Rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">.06</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Fair Value</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

<!-- Field: Page; Sequence: 28; Value: 1 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 2pt solid"><P STYLE="font-size: 10pt; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></P></DIV>
    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0">&nbsp;</P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following table summarizes the changes
in the Company&rsquo;s assets and liabilities measured at fair value as of March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Quoted prices in Active Markets for Identical Assets (Level 1)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant Other Observable Inputs (Level 2)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant Unobservable Inputs<BR> (Level 3)</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 40%; text-indent: -10pt">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Convertible promissory notes with embedded conversion option</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">627,018</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">627,018</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"></TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following table sets forth a summary
of change in fair value of the Company&rsquo;s derivative liabilities for the year ended March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt"><B>Fair value, January 1, 2020</B></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 70%; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debenture</TD><TD STYLE="width: 10%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; border-bottom: Black 1pt solid; text-align: right">148,628</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">&nbsp;Fair value, June 30, 2020</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">148,628</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(39,725</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">108,903</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;<B>Fair value, September 30, 2020</B></FONT></TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">217,806</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(69,051</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">212,397</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Fair value, December 31, 2020</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">361,152</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(202,443</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2021 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">468,309</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Fair value, March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>Warrant</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company also granted the 2020 Warrant
and the 2021 Warrant to purchase up to an aggregate of 20 million shares and 50 million shares of Common Stock, respectively. The 2020
Warrant and the 2021 Warrant each has a three-year term and each is immediately exercisable at an exercise price of $0.05 per share for
the 2020 Warrant and $0.03 per share for the 2021 Warrant, each subject to adjustment. If the Company fails to maintain an effective registration
statement with the SEC covering the resale of the 2020 Warrant Shares and the 2021 Warrant Shares, or if an Event of Default (as defined
below) has occurred and is continuing, then the holder may exercise, respectively, the 2020 Warrant and the 2021 Warrant on a &ldquo;cashless&rdquo;
basis. &ldquo;Event of Default&rdquo; means an event of default under the 2020 SPA and the 2021 SPA or the 2020 Debentures and the 2021
Debentures, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2020 Warrant and the 2021 Warrant, respectively,
contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common
Stock or common stock equivalents at a price lower than the then-current exercise price of the 2020 Warrant and the 2021 Warrant, respectively.
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 2020 Warrant and the 2021 Warrant, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The 2020 Warrant and the 2021 Warrant, respectively,
is subject to an &ldquo;exercise blocker&rdquo; such that the Selling Stockholder cannot exercise any portion, respectively, of the 2020
Warrant that and the 2021 Warrant would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued
and outstanding shares of the Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common
Stock issuable, respectively, upon exercise of the 2020 Warrant and the 2021 Warrant or conversion of the 2020 Debentures and the 2021
Debentures, respectively, that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99%
&ldquo;exercise blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">During the year ended December 31, 2020,
the Company granted the 2020 Warrant that was immediately exercisable for up to 20,000,000 shares of Common Stock. During the three months
ended March 31, 2021, the Company granted the 2021 Warrant that was immediately exercisable for up to 50,000,000 shares of Common Stock.
The 2020 Warrant and the 2021 Warrant, respectively, was fully expensed as an interest expense related to the 2020 Warrant and the 2021
Warrant issued in connection with the consummation of the transactions contemplated by the 2020 SPA and 2021 SPA, respectively, and no
liability was recorded as of March 31, 2021 and December 31, 2020, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 10 &ndash; PAYCHECK PROTECTION PROGRAM LOAN</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On May 4, 2020,
the Company entered into a Paycheck Protection Promissory Note in the original principal amount of $95,161 (the &ldquo;PPP Loan&rdquo;)
with Wells Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program
(the &ldquo;PPP&rdquo;), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the (&ldquo;CARES Act&rdquo;)
and is administered by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5
times of the average monthly payroll expenses of the qualifying business. The current term of the PPP Loan is two years, with a maturity
date of May 6, 2022 and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan
are deferred until the date on which the amount of the forgiveness determined under the PPP Program Requirements is remitted to Lender
and shall continue monthly until loan maturity. If the Borrower fails to apply for forgiveness within 10 months after the last day of
the Covered Period, as defined in the PPP Program Requirements, monthly principal and interest payments shall commence 10 months from
the last day of the Covered Period. Payments of principal and interest must be made on such date as designated by Lender in the months
that they are due Thereafter, principal and interest are payable monthly and may be prepaid by us at any time prior to maturity with no
prepayment penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">In January 2021,
the Company entered into a Paycheck Protection Promissory Note in the original principal amount of $117,487 (the &ldquo;PPP Loan 2&rdquo;)
with Wells Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program
(the &ldquo;PPP&rdquo;), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the (&ldquo;CARES Act&rdquo;)
and is administered by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5
times of the average monthly payroll expenses of the qualifying business. The current term of the PPP Loan is five years, with a maturity
date of January 2026 and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan
are deferred for the first six months of the term of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly
and may be prepaid by us at any time prior to maturity with no prepayment penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">Under the terms
of the CARES Act, recipients can apply for and receive forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness
will be determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP,
including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, &ldquo;Qualifying Expenses&rdquo;),
and on the maintenance of employee and compensation levels during a certain time period following the funding of the PPP Loan. The amount
of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The Company
has used the proceeds of the PPP Loan for salaries and wages, building lease expense, and utilities. However, no assurance is provided
that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">In May 2020, the
Company also received an advance in the amount of $7,000 as part of the Economic Injury Disaster Loan program offered by the U.S. Small
Business Administration. This advance was received after the Company filed its application with regarding to the PPP. The advance was
not included in any of the documentation related to the PPP Loan. The Company is in the process of determining how this advance will be
included as part of the PPP Loan forgiveness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 11 &ndash; EQUITY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><I>Preferred Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company&rsquo;s
issued and outstanding preferred stock, par value $0.00001 per share, at March 31, 2021 and December 31, 2020 was 988,140, respectively.
The Board, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the
designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><B>Series A Preferred
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company had
authorized 4,000,000 shares of Series A Preferred Stock, par value of $0.00001 per share (the &ldquo;Series A Preferred Stock&rdquo;),
of which no shares were authorized, issued or outstanding at March 31, 2021 and December 31, 2020 and 4,000,000 shares were authorized,
issued and outstanding at March 31, 2021 and December 31, 2020. Each share of Series A Preferred Stock, when outstanding, could have been
converted into one share of the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><B>Series B Preferred
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company had
authorized 1,200,000 shares of Series B Preferred Stock, par value of $0.00001 per share (the &ldquo;Series B Preferred Stock&rdquo;),
of which 488,000 were issued and outstanding at March 31, 2021 and December 31, 2020, respectively. Each share of Series B Preferred Stock
may be converted into one share of the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><B>Series C Preferred
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On July 8, 2020,
the Company reduced the authorized number of Series C Preferred Stock from 3,300,000 to 250 shares, par value $0.00001 per share (the
&ldquo;Series C Preferred Stock&rdquo;), by filing a Certificate of Designation of the Preferences, Rights, and Limitations of the Series
C Preferred Stock with the Secretary of State of the State of Delaware. The Company also amended the terms of the Series C Preferred Stock.
The holders of shares of the Series Preferred C Stock are now entitled to 2,000,000 votes for every share of our Series Preferred C Stock
held. The holders of the Series Preferred C Stock are not entitled to receive dividends. Upon any liquidation, dissolution, or winding
up of the Company, whether voluntary or involuntary, before any distribution or payment will be made to the holders of any stock ranking
junior to the Series C Preferred Stock, the holders of the Series C Preferred Stock will be entitled to be paid out of the Company&rsquo;s
assets an amount equal to $1.00 in the aggregate for all issued and outstanding shares of the Series C Preferred Stock (as adjusted for
any stock dividends, combinations, splits, recapitalizations, and the like with respect to such shares) (the &ldquo;Preference Value&rdquo;).
After the payment of the full applicable Preference Value of each share of the Series C Preferred Stock, our remaining assets legally
available for distribution, if any, will be distributed ratably to the holders of the Common Stock. The Series C Preferred Stock has conversion
rights, whereby each share of the Series C Preferred Stock automatically converts into one share of Common Stock on the one-year anniversary
of the issuance date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">March 31, 2021 and
December 31, 2020, the Company had authorized 250 shares, respectively, of Series C Preferred Stock of which 140, respectively, were issued
and outstanding at March 31, 2021 and December 31, 2020, respectively. At such dates, each share of the Series C Preferred Stock was convertible
into one and 1,000 shares, respectively of the Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><B>Series D Preferred
Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company had
authorized 500,000 shares of Series D Preferred Stock, par value of $0.00001 per share (the &ldquo;Series D Preferred Stock&rdquo;), of
which 500,000 shares were issued and outstanding at March 31, 2021 and December 31, 2020, respectively. Each share of the Series D Preferred
Stock may be converted into 1,000 shares of Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><I>Common Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company had
authorized 2,500,000,000 shares of the Common Stock, respectively, of which 825,726,839 shares were issued and outstanding at March 31,
2021 and 786,308,041 were issued and outstanding at December 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"><B>Equity Transactions
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On July 10, 2020,
the Company issued an aggregate of 4,000,000 shares of Common Stock upon the conversion of an aggregate of 4,000,000 shares of our Series
A Preferred Stock by 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).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On December 23,
2020, the Company issued an aggregate of 8,255,438 shares of Common Stock upon the conversion of $100,000 of the principal of, and $12,274
of accrued interest on, the First 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0170.
The First 2020 Debenture was converted at the conversion price of $0.0136, which was the lower of the 2020 Fixed Conversion Price and
the 2020 Market Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On January 12, 2021, the Company issued an
aggregate of 10,887,819 shares of Common Stock upon the conversion of $200,000 of the principal of, and $1,425 of accrued interest on,
the Third 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0231. The Third 2020 Debenture
was converted at the conversion price of $0.0185, which was the lower of the 2020 Fixed Conversion Price and the 2020 Market Conversion
Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On January 25, 2021,
the Company issued an aggregate of 7,094,732 shares of Common Stock upon the conversion of $150,000 of the principal of, and $1,118 of
accrued interest on, the First 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The
First 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2020 Fixed Conversion Price and the
2020 Market Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On January 25, 2021,
the Company issued an aggregate of 5,183,613 shares of Common Stock upon the conversion of $100,000 of the principal of, and $10,411 of
accrued interest on, the Second 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The
Second 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2020 Fixed Conversion Price and the
2020 Market Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">Pursuant to the
Agreement and Plan of Merger with S and S Beverage, Inc., the Company issued 9,000,000 shares of its common stock to the legacy S and
S Beverage, Inc. shareholders as follows: 6,300,000 shares to K &amp; L Beverage; 1,980,000 shares to William J. Stineman; 360,000 shares
to William F. Stineman; 270,000 shares to Gary Kramer; and 90,000 shares to Steven Sirus. The per-share fair market value of the common
stock was $0.0301, based on the closing price of the Company&rsquo;s common stock, as reported by OTC Markets Group Inc. on February 5,
2021, the date on which the Company filed its Current Report on Form 8-K disclosing the acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On February 19,
2021, the Company issued an aggregate of 7,252,634 shares of Common Stock upon the conversion of $150,000 of the principal of, and $855
of accrued interest on, the Second 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0260.
The Second 2020 Debenture was converted at the conversion price of $0.0208, which was the lower of the 2020 Fixed Conversion Price and
the 2020 Market Conversion Price.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">For other equity
issuances during the three month ended March 31, 2021 and the year ended December 31, 2020, please see Note 12, <I>Employees</I> and Note
13, <I>Sponsorships.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 12 &ndash; EMPLOYEES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On August 12, 2015, the Company entered into
an Employment Agreement with Robert Clark (the &ldquo;Clark Employment Agreement&rdquo;). On December 1, 2016, the Company entered into
an Amendment to Employment Agreement (the &ldquo;Clark Amendment&rdquo;; and, together with the Clark Employment Agreement, the &ldquo;Amended
Clark Employment Agreement&rdquo;). Pursuant to the terms of the Amendment Clark Employment Agreement, the Company agreed to issue, among
other securities, 200,000,000 shares of the Common Stock. Immediately, Mr. Clark decided to defer receipt of 80,000,000 of such shares;
thus leaving 120,000,000 shares of the Common Stock to be issued to him. Those 120,000,000 shares of the Common Stock were issued to Mr.
Clark, as follows: (i) on October 28, 2015, the Company issued 30,000,000 of such shares at the per-share fair market value of $0.015,
based on the closing price of the Common Stock as reported by the OTCM on the date of issuance; (ii) on March 2, 2016, the Company issued
40,000,000 of such shares at the per-share fair market value of $0.0250 based on the closing price of the Common Stock as reported by
the OTCM on the date of issuance; and (iii) on Mary 16, 2016, the Company issued 50,000,000 of such shares at the per-share fair market
value of $0.0036 based on the closing price of the Common Stock as reported by the OTCM on the date of issuance. The Company accrued 80,000,000
shares of the 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 the 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 valued at $1,000,000 by Mr. Clark. On July 31, 2019, an additional 50,000,000
shares were cancelled and returned to the Company for accrual valued at $180,000. Accordingly, as of June 30, 2020, Mr. Clark was the
record and beneficial owner of 17,100,000 of shares of the Common Stock and, subject to the July 2020 issuance to Mr. Clark of 140 shares
of Series C Preferred, the Company accrued and owed to Mr. Clark an aggregate of 170,000,000 shares to be reissued to him upon his request
pursuant to the terms of the oral agreement with him.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company issued 5,000,000 shares of Common
Stock on January 27, 2020 to Lori Radcliffe pursuant to that certain Employment Agreement dated October 7, 2019, by and between Ms. Radcliffe
and the Company. At the date of issuance, the per-share fair market value of the shares was $0.0637 based on the closing price of the
Common Stock as reported by the OTCM on the date of issuance, for a total value of $318,500.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On April 3, 2020,
the Company issued 5,000,000 shares of the Common Stock to Paul O&rsquo;Renick pursuant to an Employment Agreement dated October 1, 2019
in exchange for compensation owed in the amount of $157,500 for services provided. At the date of issuance, the per-share fair market
value was $0.0315 based on the closing price of the Common Stock as reported by the OTCM on the date of issuance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 13 &ndash; SPONSORSHIPS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On May 1, 2019,
the Company entered into a sponsorship agreement with Ryan Dodd, a professional waterski jumper (the &ldquo;Dodd Agreement&rdquo;), whereby
the Company agreed to pay monthly sponsorship fees of $1,250 for one year. On May 23, 2019, the Company issued Mr. Dodd 262,500 shares
of Common Stock. 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 the Common Stock on the date of issuance as reported by the OTCM, representing $34,388 as payment for the Company&rsquo;s sponsorship.
The Dodd Agreement was extended in January 2020 for an additional one-year term. On April 3, 2020, the Company issued 85,000 shares of
the Common Stock 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 the Common Stock as reported by the OTCM on the date of issuance, representing a payment of $2,578 for sponsorship
fees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 14 &ndash; COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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. The following represents the Company&rsquo;s commitments and contingencies
as of December 31, 2020:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Operating Lease &ndash; The Company
currently leases 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 1st thereafter.
During the lease year that commenced on June 1, 2020, the Company&rsquo;s monthly base rent will be $4,114. For the three months ended
March 31, 2021, the Company recognized operating lease expense of $13,180, which is included in in selling, general and administrative
expenses in the accompanying Consolidated Statements of Loss.</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; margin-left: 40pt; text-indent: 0pt; text-align: justify">&nbsp;</P>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 15 &ndash; LEASE LIABILITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company reported the following operating
lease liabilities as of March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Right-of-Use Operating Lease &ndash; On May 22, 2019, Gold Leaf entered into a lease agreement for 30,000 square feet of office and warehouse space in Greer County, South Carolina. The agreement includes monthly payments of $13,429, and included a $6,500 deposit. For the three months ended March 31, 2021, the Company recognized right-of-use operating lease expense of $28,125, which is included in in selling, general and administrative expenses in the accompanying Consolidated Statements of Loss.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On March 17, 2020, Kona entered into a lease agreement for equipment. The agreement includes monthly payments of $676. For the three months ended March 31, 2021, the Company recognized right-of-use operating lease expense of $1,859, which is included in in selling, general and administrative expenses in the accompanying Consolidated Statements of Loss.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Amounts recognized as right-of-use assets,
net related to operating leases are included in noncurrent assets in the accompanying Consolidated Balance Sheet, while related lease
liabilities are included in current portion of long-term debt and long-term debt. At March 31, 2021 and December 31, 2020, the right-of-use
asset and lease liability related to the operating leases were as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; text-align: left; text-indent: -10pt">Right-of-use asset</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,072,094</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,072,094</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Amortization of right-of-use asset</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(196,124</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(159,101</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Right-of-use asset, net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">875,970</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">912,993</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Operating lease liability</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Current portion of long-term lease</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">112,383</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">149,407</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Long-term lease</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">763,587</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">763,586</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total operating lease liability</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">875,970</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">912,993</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">The future payments due under operating leases
is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Fiscal year ending:</B></FONT></TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2021 (9 months remaining)</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">112,383</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2022</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">154,416</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2023</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">160,631</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2024</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">167,587</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">December 31, 2025</FONT></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">167,537</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2026 and thereafter</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">113,416</FONT></TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>$</B></FONT></TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>875,970</B></FONT></TD>
    <TD>&nbsp;</TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 16 &ndash; REVENUE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company determined that the majority
of the Company&rsquo;s revenue earned from its two reporting segments is recognized when it satisfies a single performance obligation
by transferring control of its products to a customer. The Company does not have a significant financing component or payment terms, and
the Company does not have any material unsatisfied performance obligations. The Company&rsquo;s revenues are obtained in similar geographical
locations within the United States. The Company&rsquo;s operating segments are expected to have essentially the same future prospects,
similar gross margins, sales trends, and the nature of our products and customers are essentially the same. Furthermore, the Company regularly
reviews disaggregated revenue by source for evaluating the financial performance of its operations and making resource decisions. The
Company&rsquo;s revenue is broken down by the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 75px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Distributors &ndash; revenue derived from direct sales to distributors for resale of its products: Kona Gold hemp-infused energy drinks, HighDrate CBD-infused energy waters, Storm CBD-infused water, and OOH LA Lemin lemonade beverages.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Amazon Sales &ndash; revenue derived from customer purchases through Amazon.com of our Kona Gold hemp-infused energy drinks.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Online Sales &ndash; revenue derived from customer purchases through the Company&rsquo;s websites: KonaGoldHemp.com, HighDrateMe.com, and drinklemin.com of the following products: Kona Gold hemp-infused energy drinks and apparel, HighDrate CBD-infused energy waters, Storm CBD-infused water, and OOH LA Lemin lemonade beverages.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Gold Leaf Distribution &ndash; revenue derived from Gold Leaf, which is the Company&rsquo;s wholly-owned subsidiary, that focuses on the distribution of premium beverages and snacks in key markets. These markets include over 600 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. Gold Leaf&rsquo;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 the Company&rsquo;s current product offerings.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shipping &ndash; revenue derived from shipping from direct sales of the Company&rsquo;s product through KonaGoldHemp.com, HighDrateMe.com, and drinklemin.com.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Sales Returns and Allowances &ndash; the amount reduced from all revenue sources to allow for product returns.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">The following tables presents our net revenues, by revenue source,
and the period-over-period percentage change, for the period presented:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Three Months Ended March 31,</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">2020</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">2021</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">Revenue Source</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%">Distributors</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">107,292</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">243,788</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">127</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Amazon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,358</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,502</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Online Sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,204</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold Leaf Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,836</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">180,217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">229</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Shipping</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,006</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,110</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Sales Returns and Allowances</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,624</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(23,413</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">546</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net Revenues</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">202,057</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">462,408</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">129</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following tables presents our net revenues,
by revenue source, as a percentage of total net revenues for the periods presented:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Three Months Ended March 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">Revenues</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2020</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; text-align: left">Distributors and Resellers</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">53</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">53</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Amazon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Online Sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold Leaf Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Shipping</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sales Returns, and Allowances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5</TD><TD STYLE="text-align: left">)%</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 17 &ndash; SEGMENTS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has two reportable segments:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-size: 10pt"><I>Beverages.&nbsp;</I>Includes three types of beverage products: (i) hemp-infused energy drinks, (ii) CBD-infused energy water, (iii) CBD-infused high-alkaline water, and (iv) lemon-flavored beverages, as well as apparel with the Kona Gold logo. The Beverages Segment includes all of Kona&rsquo;s and HighDrate&rsquo;s operations. The Company considers this a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying <FONT STYLE="color: #1F3864">C</FONT>onsolidated <FONT STYLE="color: #1F3864">F</FONT>inancial <FONT STYLE="color: #1F3864">S</FONT>tatements present financial information in a format that is consistent with the internal financial information used by management. We do not accumulate revenues by product classification and, therefore, it is impractical to present such information.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><I>Distribution. </I>Includes the distribution of premium beverages and snacks 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. In addition to distributing the Company&rsquo;s own beverage products, the Company also distributes other products, including alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low-carb lemonade, healthy aloe juice drinks, and CBD-infused jellybeans, all of which complement the Company&rsquo;s current product offerings. The Distribution Segment includes all of Gold Leaf&rsquo;s operations.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Amounts that do not relate to a reportable
segment have been allocated to &ldquo;Corporate and Eliminations.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following tables present information
about our reportable segments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 56%; text-align: left; text-indent: -10pt; padding-left: 20pt">Beverages Segment</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">1,242,543</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">933,148</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(190,620</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(139,028</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Corporate and eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Total Current Assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">1,051,923</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">794,120</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">NON-CURRENT ASSETS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,319,444</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,063,074</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">87,569</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">85,546</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Corporate and eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">9,066</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,233</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Total Non-Current Assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">2,416,079</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">1,156,853</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,617,407</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,880,762</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50,590</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">80,442</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Corporate and eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,997,564</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,425,552</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Total Current Liabilities</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">4,664,771</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">3,376,248</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-indent: -10pt; padding-left: 10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 10pt">NON-CURRENT LIABILITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,715,776</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,616,018</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; text-indent: -10pt; padding-left: 20pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">213,080</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">192,350</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 20pt">Corporate and eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; text-indent: -10pt; padding-left: 20pt">Total Non-Current Liabilities</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">2,928,856</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">2,808,368</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center">Three Months Ended March 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">REVENUES, NET OF SALES, RETURNS, AND ALLOWANCES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; text-align: left; text-indent: -10pt">Beverages Segment</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">179,927</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">310,093</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,836</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">180,351</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(28,036</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Revenues, Net of Sales, Returns, and Allowances</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">202,057</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">462,408</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">COST OF REVENUES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">138,063</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">193,369</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,610</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128,750</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,199</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Cost of Revenues</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">145,967</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">313,920</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">OPERATING EXPENSES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">529,515</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">410,914</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,148</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90,888</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">79,556</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">67,178</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Operating Expenses</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">647,219</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">568,980</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">OTHER INCOME / (EXPENSE):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(3,807</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(16,213</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,160</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,381,678</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Other Income / (Expense)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">(3,807</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">(1,399,051</TD><TD STYLE="font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">NET LOSS:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Beverages Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(571,014</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(310,403</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Distribution Segment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(23,922</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(40,447</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,468,693</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Net Loss</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">(594,936</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">(1,819,543</TD><TD STYLE="font-weight: bold; text-align: left">)</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 18 &ndash; ACQUISITION OF S AND S BEVERAGE,
INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On January 21, 2021,
the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired all of the capital
stock of S and S Beverage Inc. (&ldquo;S and S&rdquo;). To consummate the Acquisition, a Certificate of Merger with the Wisconsin Department
of Financial Institutions (the &ldquo;Merger Certificate&rdquo;) on February 1, 2021. On January 22, 2021, (i) Kona Gold, (ii) KGS Temporary
Company, Inc. (Kona Gold Beverage, Inc. &ldquo;Acquisition Subsidiary&rdquo;), (iii) S and S, (iv) William J. Stineman and K&amp;L Beverage,
LLC, a Wisconsin limited liability company (as the indemnifying S and S shareholders), and (v) Mr. Stineman (as representative of the
S and S Shareholders) entered into the Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;). S and S merged with and into
our Acquisition Subsidiary; S and S was the surviving entity and became our wholly-owned subsidiary of Kona Gold Beverage, Inc.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><FONT STYLE="background-color: white">Pursuant
to the Merger Agreement, and subject to the terms and conditions contained therein,&nbsp;</FONT>we acquired all of the shares of capital
stock of S and S from the five holders thereof (the &ldquo;S and S Legacy Shareholders&rdquo;). In consideration thereof, we issued to
them an aggregate of nine million restricted shares of Kona Gold Beverage, Inc.&rsquo;s common stock (the &ldquo;Acquisition Stock&rdquo;)
on a pro rata basis. Kona Gold Beverage, Inc. did not grant them any registration rights in respect of the shares of Acquisition Stock.
We also agreed to pay an aggregate of $1,050,000 (the &ldquo;Aggregate Acquisition Payments&rdquo;), the majority of which is allocated
to certain creditors of S and S (including one of the S and S Legacy Shareholders) and approximately $89,000 of which (the &ldquo;Remaining
Acquisition Payments&rdquo;) is allocated to the S and S Legacy Shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition
Payments are scheduled to be paid in the next two weeks. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition
Payments, are scheduled to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10,
2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now named OOH LA Lemin (the product line of S and S), that we
sell until the Aggregate Acquisition Payments have been paid in full. In addition to the Aggregate Acquisition Payments, we also assumed
and agreed to pay certain other liabilities of S and S as set forth in the Merger Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following is a balance sheet comparison
of S and S Beverage as of January 21, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-indent: 0pt; padding: 0pt; font-weight: bold; text-align: left">Balance Sheet</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">Book Value</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">Fair Value</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; text-align: left; text-indent: -10pt">Accounts receivable, net of allowance of $24,280</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">9,437</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">33,717</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">240,797</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">249,648</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Property, plant and equipment, net (Website Development)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,201</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,201</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">295,566</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">55,553</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">$ 956. </FONT></TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Outstanding checks</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,058</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,915</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Due to customers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,667</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Current note payable - related party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">811,761</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,050,000.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Common Stock, $30.05 par value, 10,000 shares issued and outstanding, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Additional paid-in-capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">437,701</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,397,720</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; font-weight: bold; text-align: left; text-indent: -10pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The following is the accounts included in
the Company&rsquo;s accompanying balance sheet dated March 31, 2021 as a result of the acquisition:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Balance Sheet</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 70%; text-align: left; text-indent: -10pt">Accounts receivable</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">33,717</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Website Development (Ooh La Lemin)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,201</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">Goodwill</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,275,938</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total Assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,321,856</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">956</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Loan on Acquisition</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">650,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Due to merger payments</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">Common stock, $.00001 par value, 9,000,000 shares issued</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">90</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Additional paid-in capital</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">270,810.00</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; font-weight: bold; text-align: left; text-indent: -10pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,321,856</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 19 &ndash; GOING CONCERN</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 Consolidated Financial Statements, during the three months ending March
31, 2021, the Company incurred a net loss of $1,819,543, used cash in operations of $312,712 and had a stockholders&rsquo; deficit of
$4,126,416 as of March 31, 2021. In the year ending December 31, 2020, the Company incurred a net loss of $3,125,595, used cash in operations
of $1,370,123 and had a stockholders&rsquo; deficit of $4,244,153 as of December 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company attributes this increase to losses
incurred from corporate related expenses. During the first quarter of fiscal 2021, the Company signed a Securities Purchase Agreement,
whereas, the Company incurred interest expense to warrants on a convertible note and a loss on the derivatives, which were integral to
the growth of the Company. In addition, the Company attributes the increase to costs related to our Beverages Segment of selling, general
and administrative expenses, specifically salaries, which are integral to the success of the Company. The Company continues to be impacted
by the COVID-19 pandemic during the first quarter of the 2021 fiscal year as the Company makes an effort to sign more favorable agreements
with larger, reputable tier 1 and mid-size distributors and grocery chains. These contracts saw unforeseen delays and were additionally
impacted by the COVID-19 pandemic during the 2020 fiscal year. The COVID-19 delayed the Company&rsquo;s launch of a variety of new products
during most of the 2020 fiscal year &ndash; drinks and non-drink line broadening items. Despite the increase, the Company realized an
increase in sales in the first quarter of fiscal 2021 over the previous first quarter of fiscal 2020. The Company attributes this to the
acquisition of S and S Beverage, Inc. which has added to the Company&rsquo;s portfolio. In addition, the Company has signed more favorable
with larger, reputable tier 1 and mid-size distributors and grocery chain that saw unforeseen delays and were impacted by the COVID-19
pandemic. We expect that revenue will increase in the remaining three quarters of fiscal year 2021 as distribution related to our current
distributors affected by COVID-19 that have resumed distribution will continue to see fewer impacts from the COVID-19 pandemic going forward.
The Company will continue to sign favorable agreements with larger, tier 1 and mid-size distributors in our Beverages Segment during fiscal
2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">As a result, the Company&rsquo;s continuation
as a going concern is dependent on the 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. 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 accompanying Consolidated Financial Statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 20 &ndash; CONCENTRATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company had certain customers whose revenue
individually represented 10% or more of the Company&rsquo;s total revenue, less intercompany transactions. In addition, certain customers
had outstanding accounts receivables that individually represented 10% or more of the Company&rsquo;s total outstanding accounts receivables,
less intercompany transactions, but before receivable allowances. These customers are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In the accompanying Consolidated Balance
Sheet as of March 31, 2021, the Company&rsquo;s net accounts receivable were $111,676, representing total accounts receivable of approximately
$153,213 less sales returns and allowance of approximately $37,570 and less doubtful accounts of approximately $3,967. In the accompanying
Consolidated Balance Sheet as of December 31, 2020, the Company&rsquo;s net accounts receivable were $(10,508), representing total accounts
receivable of approximately $22,166 less sales returns and allowance of approximately $28,707 and less doubtful accounts of approximately
$3,967. The breakdown of the Company&rsquo;s accounts receivable is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">March 31, 2021</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">December 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; font-weight: bold; text-align: left; text-indent: -10pt">Total Accounts Receivable</TD><TD STYLE="width: 8%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">153,213</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 8%; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="width: 12%; font-weight: bold; text-align: right">22,166</TD><TD STYLE="width: 1%; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Less: Sales Returns and Allowances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37,570</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">28,707</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Less: Doubtful Accounts</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,967</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,967</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Accounts Receivable, net</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">111,676</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">(10,508</TD><TD STYLE="font-weight: bold; text-align: left">)</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company determined that three customers
accounted for approximately 51% (or approximately 21%, 19%, and 11%), or an aggregate of $78,224, of the outstanding total accounts receivable
of $153,213 as of March 31, 2021. The Company determined that four customers accounted for approximately 76% (or approximately 26%, 22%,
14% and 14%), or an aggregate of $16,904, of the outstanding total accounts receivable of $22,166 as of December 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In the accompanying Consolidated Statements
of Loss for the three months ended March 31, 2021, one customer represented 12% of the Company&rsquo;s total net revenue of $462,408 for
the three months ended March 31, 2021. In the accompanying Consolidated Statements of Loss for the three months ended March 31, 2020,
no one customer represented 10% or more of the Company&rsquo;s total net revenue of $202,057 for the three months ended March 31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The raw materials used in the production
of the Company&rsquo;s products are obtained by the Company&rsquo;s co-packers and consist primarily of materials such as the flavors,
caffeine, sugars or sucralose, taurine, vitamins, CBD, and hemp seed protein contained in its beverages, the bottles in which its beverages
are packaged, and the labeling on the outside of its beverages. These principal raw materials are subject to price and availability fluctuations.
The Company currently relies on a few key co-packers, which in turn rely on a few key suppliers. The Company continually endeavors to
have back-up co-packers, which co-packers would in turn depend on their third-party suppliers to supply certain of the flavors and concentrates
that are used in the Company&rsquo;s beverages. The Company is also dependent on these co-packers to negotiate arrangements with their
existing suppliers that would enable the Company to obtain access to certain of such concentrates or flavor formulas under certain extraordinary
circumstances. Additionally, in a limited number of cases, the Company&rsquo;s co-packers may have contractual restrictions with their
suppliers or the Company&rsquo;s co-packers may need to obtain regulatory approvals and licenses that may limit the co-packers&rsquo;
ability to enter into agreements with alternative suppliers. Contractual restrictions in the agreements the Company has with certain distributors
may also limit the Company&rsquo;s ability to enter into agreements with alternative distributors. The Company believes that a satisfactory
supply of co-packers will continue to be available at competitive prices, although there can be no assurance in this regard. With respect
to Gold Leaf&rsquo;s operations, the Company continually endeavors to contract with additional beverage vendors to ensure the Company
has adequate inventory. The Company believes that a satisfactory supply of vendors will continue to be available at competitive prices,
although there can be no assurance in this regard.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company had certain vendors that individually
represented 10% or more of the Company&rsquo;s inventory purchases. For the three months ended March 31, 2021, the Company purchased 73%
of its inventory from five vendors for the three months ended March 31, 2021. Of these vendors, $21,988 is due to these vendors as of
the balance sheet dated March 31, 2021. For the year ended December 31, 2020, the Company did not purchase in excess of 10% of its inventory
from any single vendor.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 21 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">Management has evaluated
subsequent events through May 17, 2021, the date that the March 31, 2021 Consolidated Financial Statements were issued, and has determined
the following events have occurred that would warrant additional disclosure:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">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 &ldquo;Public Health Emergency of International Concern.&rdquo; 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, the Company&rsquo;s products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact the Company&rsquo;s business, financial condition, and cash flow.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>Kona Gold Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>(formerly known as Kona Gold
Solutions, Inc.)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0; margin-bottom: 0"><B>NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS</B></P>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">The extent of the effect of COVID-19 on the
Company&rsquo;s 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 the Company&rsquo;s business. However, as the pandemic continued for
much of the 2020 fiscal year and if it continues for a prolonged period in the 2021 fiscal year, it could have a continuing material adverse
effect on the Company&rsquo;s business, results of operations, financial condition, and cash flow and adversely impact the quoted price
of the Common Stock on the OTCM&rsquo;s OTCQB<SUP>&reg;</SUP> Venture Market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">The extent to which the COVID-19 pandemic
will further impact the Company&rsquo;s 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, the Company cannot reasonably
estimate the impact to its business at this time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On April 27, 2021, the Paycheck Protection Promissory Note, dated May 4, 2020, in the original principal amount of $95,161 (the &ldquo;PPP Loan&rdquo;) with Wells Fargo Bank, N.A.&nbsp;was forgiven for the full amount. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the &ldquo;PPP&rdquo;), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the (&ldquo;CARES Act&rdquo;) and is administered by the U.S. Small Business Administration.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-size: 10pt">On May 5, 2021, the Company and the Selling Stockholder entered into a Limited Amendment Agreement, dated as of May 5, 2021, pursuant to which the parties agreed to a partial Second Closing of the transactions contemplated by the 2021 SPA, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture (the &ldquo;Partial Second Convertible Debenture&rdquo;) in the face amount of $200,000 for a purchase price of $192,000.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">On May 5, 2021, the Company issued an aggregate of 14,436,426 shares of Common Stock upon the conversion of $300,000 of the principal of, and $7,496 of accrued interest on, the Third 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The Third 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2021 Fixed Conversion Price and the 2021 Market Conversion Price.</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(5)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">On April 4, 2021, the Company signed a Note Modification Amendment to a Standard Promissory Note Agreement with a related party originally dated January 15, 2019 for the principal sum of $20,000. The Note Modification Amendment extends the due date of the principal sum for one year, payable on April 4, 2022.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD><FONT STYLE="font-size: 10pt">(6)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">On April 4, 2021, the Company signed a Modification Amendment to a Line of Credit and Security Agreement with a related party originally dated April 4, 2019 for the principal sum up to $1,500,000 plus interest, fees and costs. The Modification Amendment extends the due date of the principal sum for one year, payable on April 4, 2022.</FONT></TD></TR>
  </TABLE>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>INDEX TO FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; width: 95%; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Financial Statements of S and S Beverage, Inc. </B></FONT></TD>
    <TD STYLE="vertical-align: bottom; width: 5%; padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
  <TR>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_001">Unaudited Balance Sheet as of January 31, 2021 and audited balance sheet as of December 31, 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-41</TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_002">Unaudited Statements of Loss for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-42</TD></TR>
  <TR>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_003">Unaudited Statements of Stockholders&rsquo; Deficit for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-43</TD></TR>
  <TR STYLE="background-color: white">
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_004">Unaudited Statements of Cash Flows for the one month ended January 31, 2021 and 2020</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-44</TD></TR>
  <TR>
    <TD STYLE="vertical-align: top; padding-left: 8.1pt; text-indent: -8.1pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="#b_005">Notes to the Consolidated Financial Statements</A></FONT></TD>
    <TD STYLE="vertical-align: bottom; padding-right: 0.8pt; text-align: right">F-45</TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>S and S Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="b_001"></A>BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">January 31</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center">December&nbsp;31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; font-style: italic; text-align: center; text-indent: -10pt">ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Cash and cash equivalents</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; text-align: left; text-indent: -10pt">Accounts receivable, net of allowance of $24,280 and $0, respectively</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">9,438</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">9,438</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Inventory</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">240,797</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">240,797</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,235</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,235</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">NON-CURRENT ASSETS</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Property, plant and equipment, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,200</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">12,200</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total assets</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; font-style: italic; text-align: center">LIABILITIES AND STOCKHOLDERS&rsquo; DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accounts payable and accrued liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">55,553</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">78,782</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Outstanding checks</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,058</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,362</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Interest payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,915</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,915</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Due to customers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,667</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">19,667</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Current note payable - related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">811,761</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">801,761</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Total current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">921,954</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">918,487</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">NON-CURRENT LIABILITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Note payable &ndash; related party, net of current</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">921,954</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">918,487</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">COMMITMENTS AND CONTINGENCIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">STOCKHOLDERS&rsquo; DEFICIT</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Common Stock, $30.05 par value, 10,000 shares issued and outstanding, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">300,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">437,701</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">437,701</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Accumulated deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,397,720</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,394,253</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Total stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(659,519</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(656,052</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; text-align: left; text-indent: -10pt">Total liabilities and stockholders&rsquo; deficit</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">262,435</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral part of these
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>S and S Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="b_002"></A>STATEMENTS OF LOSS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">January 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="7" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 56%; font-weight: bold; text-indent: -10pt">REVENUES</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">572</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">11,520</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">COST OF REVENUES</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,130</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">36,605</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Gross profit</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(558</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(25,085</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">OPERATING EXPENSES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Selling, general and administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,909</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">57,316</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Income (Loss) from operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,467</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(82,401</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Other income / (expense)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Net Income (Loss)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,467</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(82,401</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">WEIGHTED AVERAGE NUMBER OF COMMON SHARES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">NET LOSS PER COMMON SHARE:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Basic and diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(0.35</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(8.24</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral part of these
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 2pt solid"><P STYLE="font-size: 10pt; text-align: center; margin-top: 0pt; margin-bottom: 0pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></P></DIV>
    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>S and S Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="b_003"></A>STATEMENTS OF STOCKHOLDERS&rsquo; DEFICIT </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Common Stock<BR> $.00001 Par</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Additional Paid-in</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Accumulated</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Total<BR> Stockholders&rsquo;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Shares</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Amount</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Deficit</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 35%; font-weight: bold; text-indent: -10pt">Balance December 31, 2019</TD><TD STYLE="width: 2%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; width: 1%; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; width: 9%; font-weight: bold; text-align: right">10,000</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; width: 9%; font-weight: bold; text-align: right">300,500</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; width: 9%; font-weight: bold; text-align: right">412,701</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="width: 2%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; width: 9%; font-weight: bold; text-align: right">(765,784</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="width: 2%; font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; width: 1%; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; width: 9%; font-weight: bold; text-align: right">(52,583</TD><TD STYLE="width: 1%; padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">One-month Net Income (Loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(82,401</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(82,401</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balance January 31, 2020</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">300,500</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">412,701</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(848,185</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(134,984</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Loan Forgiveness</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">25,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">11-month Net Income (loss)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(546,068</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(546,068</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balance December 31, 2020</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">300,500</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">437,701</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(1,394,253</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(656,052</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Net Income (loss)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(3,457</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(3,467</TD><TD STYLE="font-weight: bold; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Balance January 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">10,000</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">300,500</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">437,701</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(1,397,720</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">(659,519</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">)</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral part of these
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>S and S Beverage, Inc.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="b_004"></A>STATEMENTS OF CASH FLOWS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">For the One Month Ended<BR> January 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">2020</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; text-align: left; text-indent: -10pt">Net Income</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(3,467</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">(82,401</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Adjustments to reconcile net income to net cash provided by operations:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-indent: -10pt">Depreciation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Changes in operating assets and liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Decrease (increase) in accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,024</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Decrease (increase) in inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(18,757</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Increase (decrease) in accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(23,229</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,830</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Increase (decrease) in interest payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; text-align: left; text-indent: -10pt">Increase (decrease) in due to/from</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(27,886</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) operating activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(26,696</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(97,190</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Purchases of property, plant and equipment</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Changes in note payable &ndash; related party</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">45,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 40pt; font-weight: bold; text-align: left; text-indent: -10pt">Net cash provided by (used in) financing activities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">10,000</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">45,001</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Net cash increase/(decrease) for period</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(16,696</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(52,189</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Cash at beginning of period</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(6,362</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">30,075</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Cash at end of period</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(23,058</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(22,114</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Cash paid for income taxes</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Cash paid for interest</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The accompanying notes are an integral part of these
consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><A NAME="b_005"></A>NOTE 1 &ndash; ORGANIZATION AND DESCRIPTION OF BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">S and S Beverage, Inc. (the &ldquo;Company&rdquo;),
a Wisconsin Corporation, owns and operates a line of superior lemonade products in four distinct flavors under the Lemin brand. The Company
is primarily focused on product development in the functional beverage sector.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Accounting Standards Codification subtopic
Segment Reporting 280-10 (&ldquo;ASC 280-10&rdquo;) establishes standards for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders.
ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information
disclosed herein materially represents all the financial information related to the Company&rsquo;s only material principal operating
segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company currently sells its products
through resellers, the Company website, and distributors that span across the United States. The Company&rsquo;s products are available
in wide variety of stores, including convenience and grocery stores, and gift shops.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>Effects of COVID-19</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In January 2020, the World Health Organization
(the &ldquo;WHO&rdquo;) announced a global health emergency because of a new strain of coronavirus (&ldquo;COVID-19&rdquo;) that originated
in Wuhan, China and generated significant risks to the international community as the virus spread globally beyond its point of origin.
In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in global exposure. The COVID-19 pandemic
is disrupting businesses and affecting production and sales across a range of industries, as well as causing volatility in the financial
markets. The extent of the impact of the COVID-19 pandemic on the Company&rsquo;s consumer demand, sales, and financial performance will
depend on certain developments, including, among other things, the duration and spread of the outbreak and the impact on the Company&rsquo;s
consumers and employees, all of which are uncertain and cannot be predicted. Management is actively monitoring this situation and potential
impacts on our financial condition, liquidity, and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><B>NOTE 2 &ndash; SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>A.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Basic of presentation</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The accompanying consolidated financial statements
are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting
and in accordance with generally accepted accounting principles (&ldquo;GAAP&rdquo;) in the United States.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>B.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Use of estimates</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The preparation of the consolidated financial
statements in conformity with GAAP 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>C.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Cash and cash equivalents</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>D.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Fair value of financial instruments</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Leve 1 &ndash; quoted prices in active markets
for identical assets or liabilities;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Level 2 &ndash; 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 can be corroborated
by observable market data for substantially the full term of the assets or liabilities; or</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Level 3 &ndash; unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>E.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Accounts receivable</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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&rsquo;s inability to meet its financial obligations, bad debt charges are recorded based on an overall assessment
of past due accounts receivable outstanding. No bad debt was recorded in the accompanying statement of income one month ending January
31, 2021 and 2020, respectively. Management will review annually to determine provisions and record an allowance as deemed necessary.
In the opinion of management, no provision is deemed necessary for sales returns and all accounts were deemed collectible at December
31, 2020. The balance of allowance for Uncollectible Accounts as of January 31, 2021 and December 31, 2020 is $24,280, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>F.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Inventories</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company&rsquo;s inventories are valued
at the lower cost or net realizable value. The Company&rsquo;s inventories consist almost entirely of finished goods and freight. 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 the balance sheets dated January 31, 2021 and December 31, 2020, all inventory
is current.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>G.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Property, plant and equipment</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Depreciation is provided using the straight-line
method over the estimated useful lives of the asset as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><B>Estimated useful lives (in years)</B></FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD STYLE="width: 89%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Furniture and fixtures</FONT></TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Machinery and equipment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">7</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: #CCEEFF">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Vehicles</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5</FONT></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Computer equipment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5 &ndash; 7</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>H.</B></FONT></TD><TD><FONT STYLE="font-size: 10pt"><B><U>Revenue recognition</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">We sell our Lemin
Superior Lemonade, now named OOH LA Lemin, through resellers and distributors. In evaluating the timing of the transfer of control of
products to our 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 distributors and resellers when products that
do not require further services by us are shipped, when there are no uncertainties surrounding product acceptance, and when collectability
is reasonably assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">On January 1, 2019, the Company adopted ASU
No. 2014-09, <I>Revenue from Contracts with Customers (Topic 606)</I> (&ldquo;ASC Topic 606&rdquo;). The underlying principle of ASC Topic
606 is to recognize revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation
of Topic ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">To apply these principles, Topic 606 outlines a five-step process:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt">1.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Identify the contract with a customer.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt">2.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Identify the separate performance obligations in the contract.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt">3.</FONT></TD><TD><FONT STYLE="font-size: 10pt">Determine the transaction price.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt">4.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Allocate the transaction price to the separate performance obligations in
the contract.</FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="width: 54pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt">5.</FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Recognize revenue when (or as) the entity satisfies a performance obligation</FONT></TD></TR></TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Pursuant to ASC Topic 606, the Company recognizes
revenue when performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control,
including the risks and rewards of ownership. With respect to the Company, performance is deemed to occur upon shipment or delivery of
products to its customers based on the written contract terms, which is also when control is transferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">The Company evaluated
the guidance in ASC 606-10-50-5 and the related implementation guidance to determine if disaggregation of revenues that would be meaningful.
The Company&rsquo;s revenue is earned from its sale of Lemin Superior Lemonade, now named OOH LA Lemin, and is recognized when it satisfies
a single performance obligation by transferring control of its products to a customer. The Company does not have significant financing
component or payment terms, and it does not have any material unsatisfied performance obligations. The sales from the Company&rsquo;s
beverages are organized as one reportable segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>I.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Cost of revenue</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">Cost of revenues
consists primarily of expenses associated with the delivery and distribution of products. 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 revenues. The costs are charged to cost of revenues in the same period that the associated revenue is earned.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>J.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Impairment of long-lived assets</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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, 2020 and determined long-lived assets were not impaired.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>K.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Income taxes</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company accounts for income taxes in
accordance with FASB ASC 740, <I>Income Taxes, </I>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 &ldquo;more likely than not&rdquo; 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has no recorded liabilities for
uncertain tax positions as of the accompanying Consolidated Balance Sheets dated December 31, 2020 and December 31, 2019, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>L.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Advertising costs</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 one month ended January 31, 2021 and 2020, were approximately $286 and $2,195,
respectively, which amounts were included in selling, general and administrative expenses in the accompanying Consolidated Statements
of Loss.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>M.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Concentration of Credit Risk</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>N.</B></FONT></TD><TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt"><B><U>Basic and diluted earnings per share</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">In accordance with accounting guidance now
codifies as FASB ASC 260 <I>(Earnings per Share)</I>, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">Diluted per share loss is the same as basic
per share loss when there is a loss from continuing operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>O.</B></FONT></TD><TD><FONT STYLE="font-size: 10pt"><B><U>Segments</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">ASC 280-10, <I>Segment Reporting</I> (&ldquo;ASC
280-10&rdquo;), establishes standards for reporting information regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes
standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of
an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or
decision-making group, in making decisions how to allocate resources and assess performance. The Company identified one operating segment
that reports revenue, including both sales to external customers and intersegment sales or transfers, that are 10% or more of the combined
revenue, internal and external, of the Company&rsquo;s operating segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><B>&nbsp;</B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top">
<TD STYLE="width: 18pt"></TD><TD STYLE="width: 18pt"><FONT STYLE="font-size: 10pt"><B>P.</B></FONT></TD><TD><FONT STYLE="font-size: 10pt"><B><U>Recently issued accounting pronouncements</U></B></FONT></TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has evaluated all recently issued
accounting pronouncements, issued or proposed, by the FASB or other standards-setting bodies as of the period ending September 30, 2020.
The Company does not expect a material impact on the Company&rsquo;s financial position, result of operations, or cash flows from these
pronouncements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 2 &ndash; INVENTORY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Inventory consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">January 31, 2021</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>2020</B></P></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%">Lemin</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">234,885</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">234,885</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Trays, Cans and Sleeves</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,912</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,912</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Raw Materials</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: 0pt">Total Inventory</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">240,797</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">240,797</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 3 &ndash; PROPERTY, PLANT AND EQUIPMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Property, plant and equipment consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">January 31, 2021</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="border-bottom: Black 1pt solid; text-align: center"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>December 31,</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>2020</B></P></TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; text-align: left">Start-up Cost</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">11</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">11</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Website Costs</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,500</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Accumulated Depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,311</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,311</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: 0pt">Property, plant and equipment, net</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">12,200</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">12,200</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">Amortization expense for the one month ended January 31, 2021
and 2020 was $0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 4&ndash; RELATED PARTY TRANSACTIONS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">A.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of two note payables with a related party:</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">1)</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of one 8% interest per annum note payable for $200,000 from a related party. Payments of $9,045 per month is due beginning October 17, 2018. On June 1, 2020, an additional $35,000 was received, and on January 14, 2021, an additional $10,000 was received on the same note, under new terms that the Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023. &nbsp;In the accompanying balance sheets dated January 31, 2021 and December 31, 2020, the balance of the note payable is $123,761, and $113,761, respectively, and accrued interest was $11,776, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2)</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of one 8% interest per annum note payable for $612,700 from a related party on November 1, 2019. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023. On December 31, 2019, $412,700 has been forgiven in full by the related party. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $200,000, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3)</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of one 2% interest per annum note payable for $300,000 from a related party on February 1, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date three (3) days after the sale of substantially all of the assets or equity. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $300,000, respectively, and accrued interest was $9.953, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4)</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of one 0% interest per annum note payable for $200,000 from a related party on July 31, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date three (3) days after the sale of substantially all of the assets or equity. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $198,000, respectively, and accrued interest was $0, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">5)</FONT></TD>
    <TD><FONT STYLE="font: 10pt Times New Roman, Times, Serif">Long-term debt consists of one 8% interest per annum note payable for $25,000 from a related party on April 30, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023. On November 30, 2020, this debt was forgiven. In the accompanying balance sheet dated January 31, 2021, and December 31, 2020, there is no balance due, respectively.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify; text-indent: -18pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt; text-align: justify; text-indent: -18pt">The future maturities
are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">December 31, 2021 &ndash; December 31, 2022</FONT></TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 64%; text-align: left"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">November 1, 2023</FONT></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; width: 1%; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; width: 23%; text-align: right">798,261</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">798,261</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 5 &ndash; EQUITY TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>Common Stock</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has authorized 10,000 shares
of common stock with a par value of $30.50, of which 10,000 were issued and outstanding as of the one month ended January 31, 2021 and
the year ended December 31, 2020, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>Transactions </I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">On January 21, 2021,
the Company entered into an Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;) with Kona Gold Beverage, Inc. (&ldquo;Kona
Gold&rdquo;), pursuant to which it acquired all of the capital stock of the Company. The parties to the Merger Agreement are (i) Kona
Gold, (ii) KGS Temporary Company, Inc., a wholly-owned subsidiary of Kona Gold (&ldquo;Acquisition Subsidiary&rdquo;), (iii) the Company,
(iv) William J. Stineman and K&amp;L Beverage, LLC (as the indemnifying parties on behalf of the Company&rsquo;s shareholders), and (v)
Mr. Stineman (as representative of the Company&rsquo;s shareholders). As a result of the transactions contemplated by the Merger Agreement,
the Company merged with and into the Acquisition Subsidiary. The Company was the surviving entity and became Kona Gold&rsquo;s wholly-owned
subsidiary.&nbsp;<FONT STYLE="background-color: white">The Merger Agreement contains customary representations, warranties, covenants,
and agreements of the parties, including certain indemnification rights in favor of Kona Gold that are customary for a transaction of
that nature and magnitude.&nbsp;</FONT>The two individual members of K&amp;L Beverage, LLC, agreed to guarantee its indemnification obligations.
To consummate the Acquisition, a Certificate of Merger was filed with the Wisconsin Department of Financial Institutions (the &ldquo;Merger
Certificate&rdquo;) on February 1, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">In consideration
of the transactions contemplated by the Merger Agreement, Kona Gold issued to the Company&rsquo;s shareholders an aggregate of nine million
restricted shares of its common stock (the &ldquo;Acquisition Stock&rdquo;) on a pro rata basis. Kona Gold did not grant any registration
rights in respect of the shares of Acquisition Stock. Kona Gold also agreed to pay an aggregate of $1,050,000 (the &ldquo;Aggregate Acquisition
Payments&rdquo;), the majority of which is allocated to certain of the Company&rsquo;s creditors (including one of the Company&rsquo;s
legacy shareholders) and approximately $89,000 of which (the &ldquo;Remaining Acquisition Payments&rdquo;) is allocated to the Company&rsquo;s
shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid by February 11, 2021. The balance of the Aggregate
Acquisition Payments, including the Remaining Acquisition Payments, are scheduled to be paid in monthly installments, in arrears on the
tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now
named OOH LA Lemin, that Kona Gold and the Company sells until the Aggregate Acquisition Payments have been paid in full. In addition
to the Aggregate Acquisition Payments, Kona Gold assumed and agreed to pay certain other liabilities of the Company as set forth in the
Merger Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 6 &ndash; COMMITMENTS AND CONTINGENCIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 7 &ndash; GOING CONCERN</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">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 Consolidated Financial Statements, during the one month ended January
31, 2021, the Company incurred a net loss of $3,467, used cash in operations of $26,696 and had a stockholders&rsquo; deficit of $659,519
as of January 31, 2021. As reflected in the accompanying Consolidated Financial Statements, during the year ended December 31, 2020, the
Company incurred a net loss of $628,469, used cash in operations of $584,438 and had a stockholders&rsquo; deficit of $656,052 as of December
31, 2020.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company attributes this loss to the Company
being impacted by the COVID-19 pandemic during the fiscal year 2020 and during the first month of fiscal year 2021. The COVID-19 delayed
the distribution of products during most of 2020 &ndash; drink line broadening items. In addition, the Company finalized its acquisition
in January 2021, and sales were reduced during this time. See Note 9, <I>Subsequent Events</I>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">As a result, the Company&rsquo;s continuation
as a going concern is dependent on the ability to obtain additional financing until we can generate sufficient cash flow from operations
to meet our obligations. Were we not acquired, we would have continued to seek additional debt or equity financing to continue our operations.
There is no assurance that we will ever be profitable or that debt or equity financing would have been available to us in the amounts,
on terms, and at times deemed acceptable to us, if at all. Obtaining commercial loans, assuming those loans would have been available,
would have increased our liabilities and future cash commitments. If we were unable to obtain financing or be acquired in the amounts
and on terms deemed acceptable to us, we would have been unable to continue our business, as planned, and as a result might have been
required to scale back or cease operations for our business, the result of which would be that our stockholders would have lost some or
all of their investment. The accompanying Financial Statements do not include any adjustments that might be necessary if the Company were
unable to continue as a going concern.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>NOTE 8 &ndash; CONCENTRATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company has certain customers whose revenue
individually represented 10% or more of the Company&rsquo;s total revenue, or outstanding accounts receivable individually represented
10% or more of the Company&rsquo;s total outstanding accounts receivable, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">For the one month ended January 31, 2021,
no customers individually represented 10% or more of the Company&rsquo;s total revenue, and four customers accounted for 100%, or $33,718,
of the outstanding accounts receivable, and the Company has recorded an allowance for uncollectible accounts of $24,280. The net accounts
receivable for the year ending December 31, 2020 is $9,438 in the accompanying balance sheet. For the year ended December 31, 2020, three
customers individually represented 77%, or approximately $255,300 of the Company&rsquo;s total revenue, and four customers accounted for
100%, or $33,718, of the outstanding accounts receivable, and the Company has recorded an allowance for uncollectible accounts of $24,280.
The net accounts receivable for the year ending December 31, 2020 is $9,438 in the accompanying balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">The Company had certain vendors that individually
represented 10% or more of the Company&rsquo;s inventory purchases, as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt">For the one month ended January 31, 2021 balance sheet, the Company
did not purchase any inventory from any vendor.. For the year ended December 31, 2020 balance sheet, the Company purchased 100% of the
Company&rsquo;s inventory from three vendors, of which $4,365 amount was due to these vendors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>NOTE 9 &ndash; SUBSEQUENT EVENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">Management has evaluated
subsequent events through May 17, 2021, the date which the January 31, 2021 Financial Statements were issued, and has determined the following
events have occurred that would warrant additional disclosure:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">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 &ldquo;Public Health Emergency of International Concern.&rdquo; 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, the Company&rsquo;s products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact the Company&rsquo;s business, financial condition, and cash flow.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">The extent of the effect of COVID-19 on the
Company&rsquo;s 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 the Company&rsquo;s business. However, if the pandemic continues for
a prolonged period, it could have a material adverse effect on the Company&rsquo;s business, results of operations, financial condition,
and cash flow.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">The extent to which the COVID-19 pandemic
will further impact the Company&rsquo;s 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, the Company cannot reasonably
estimate the impact to its business at this time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 54pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">(2)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">On January 21, 2021, the Company entered into an Agreement and Plan of Merger (the &ldquo;Merger Agreement&rdquo;) with Kona Gold Beverage, Inc. (&ldquo;Kona Gold&rdquo;), pursuant to which it acquired all of the capital stock of the Company. The parties to the Merger Agreement are (i) Kona Gold, (ii) KGS Temporary Company, Inc., a wholly-owned subsidiary of Kona Gold (&ldquo;Acquisition Subsidiary&rdquo;), (iii) the Company, (iv) William J. Stineman and K&amp;L Beverage, LLC (as the indemnifying parties on behalf of the Company&rsquo;s shareholders), and (v) Mr. Stineman (as representative of the Company&rsquo;s shareholders). As a result of the transactions contemplated by the Merger Agreement, the Company merged with and into the Acquisition Subsidiary. The Company was the surviving entity and became Kona Gold&rsquo;s wholly-owned subsidiary.&nbsp;<FONT STYLE="background-color: white">The Merger Agreement contains customary representations, warranties, covenants, and agreements of the parties, including certain indemnification rights in favor of Kona Gold that are customary for a transaction of that nature and magnitude.&nbsp;</FONT>The two individual members of K&amp;L Beverage, LLC, agreed to guarantee its indemnification obligations. To consummate the Acquisition, a Certificate of Merger was filed with the Wisconsin Department of Financial Institutions (the &ldquo;Merger Certificate&rdquo;) on February 1, 2021.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">In consideration of the transactions contemplated by the Merger Agreement, Kona Gold issued to the Company&rsquo;s shareholders an aggregate of nine million restricted shares of its common stock (the &ldquo;Acquisition Stock&rdquo;) on a pro rata basis. Kona Gold did not grant any registration rights in respect of the shares of Acquisition Stock. Kona Gold also agreed to pay an aggregate of $1,050,000 (the &ldquo;Aggregate Acquisition Payments&rdquo;), the majority of which is allocated to certain of the Company&rsquo;s creditors (including one of the Company&rsquo;s legacy shareholders) and approximately $89,000 of which (the &ldquo;Remaining Acquisition Payments&rdquo;) is allocated to the Company&rsquo;s shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid by February 11, 2021. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now named OOH LA Lemin, that Kona Gold and the Company sells until the Aggregate Acquisition Payments have been paid in full. In addition to the Aggregate Acquisition Payments, Kona Gold assumed and agreed to pay certain other liabilities of the Company as set forth in the Merger Agreement.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><A NAME="a_008"></A>ITEM 2. MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B>&nbsp;</B></P>

<P STYLE="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><B>KONA GOLD BEVERAGE, INC.&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For a description of our significant accounting policies
and an understanding of the significant factors that influenced our performance during the three months ended March 31, 2021, this &ldquo;Management&rsquo;s
Discussion and Analysis of Financial Condition and Results of Operations&rdquo; (hereafter referred to as &ldquo;MD&amp;A&rdquo;) should
be read in conjunction with the Unaudited consolidated financial statements, including the related notes, appearing in Part I, Item 1
of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the &ldquo;2020
Form 10-K&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Note about Forward-Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">This Quarterly Report on Form 10-Q includes statements
that constitute &ldquo;forward-looking statements.&rdquo; These forward-looking statements are often characterized by the terms &ldquo;may,&rdquo;
&ldquo;believes,&rdquo; &ldquo;projects,&rdquo; &ldquo;intends,&rdquo; &ldquo;plans,&rdquo; &ldquo;expects,&rdquo; or &ldquo;anticipates,&rdquo;
and do not reflect historical facts.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Specific forward-looking statements contained in this
portion of the Quarterly Report include, but are not limited to: (i) statements that are based on current projections and expectations
about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii)
statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations,
prospects, results, and performance, (v) statements about the Chapter 11 Case, (vi) statements that the cash on hand and additional cash
generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient
liquidity for the next 12 months, and (vii) statements that the outcome of pending legal proceedings will not have a material adverse
effect on business, financial position and results of operations, cash flow or liquidity.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Forward-looking statements involve risks, uncertainties
and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or
implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements
and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2020 Form 10-K
under Item 1A &ldquo;Risk Factors&rdquo;, as well as other factors that we are currently unable to identify or quantify, but that may
exist in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In addition, the foregoing factors may generally
affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements
were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained
on our websites <U>www.konagoldbeverage.com</U>, <U>www.konagoldhemp.com</U>, <U>www.highdrateme.com</U>, and <U>www.goldleafdist.com
</U>or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>The following discussion and analysis of the results
of operations and financial condition for the three months ended March 31, 2021 and March 31, 2020 should be read in conjunction with
the financial statements and related notes and the other financial information that are included. 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 &ldquo;Risk Factors,&rdquo;
&ldquo;Cautionary Note Regarding Forward-Looking Statements,&rdquo; and &ldquo;Description of Business&rdquo; sections in this Registration
Statement. We use words such as &ldquo;anticipate,&rdquo; &ldquo;estimate,&rdquo; &ldquo;plan,&rdquo; &ldquo;project,&rdquo; &ldquo;continuing,&rdquo;
&ldquo;ongoing,&rdquo; &ldquo;expect,&rdquo; &ldquo;believe,&rdquo; &ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo;
&ldquo;could,&rdquo; and similar expressions to identify forward-looking statements. We and our representatives may from time to time
make written or oral statements that are &ldquo;forward-looking,&rdquo; including statements contained in this 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 &ldquo;expect,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo; &ldquo;plan,&rdquo; &ldquo;believe,&rdquo;
&ldquo;seek,&rdquo; &ldquo;estimate,&rdquo; &ldquo;project,&rdquo; &ldquo;forecast,&rdquo; &ldquo;may,&rdquo; &ldquo;should,&rdquo; 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.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We undertake no obligation to update or revise any
of the forward-looking statements after the date of this 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px; font: 10pt Times New Roman, Times, Serif">&nbsp;</TD>
    <TD STYLE="width: 24px; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans; </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our failure to earn revenues or profits; </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Volatility or decline of our stock price; </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Potential fluctuation in our financial results;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Rapid and significant changes in markets; </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Litigation with or legal claims and allegations by outside parties;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impacts from the COVID-19 pandemic; and </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insufficient revenues to cover operating costs. </FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following discussion should be read in conjunction
with the financial statements and the notes thereto. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="margin: 0; font: 10pt Times New Roman, Times, Serif"><I>Overview</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our business has grown rapidly since inception, and
we anticipate that our business will continue to grow; however, in the year ended December 31, 2020, the Company saw unforeseen delays
in signing more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains and we were additionally
impacted by the COVID-19 pandemic during the fiscal year. The COVID-19 delayed the Company&rsquo;s launch of a variety of new products
during most of the 2020 fiscal year &ndash; drinks and non-drink line broadening items. Our Beverages Segment has three main revenue streams:
product sales from online consumers, product sales through resellers, and product sales from distributors. In the first quarter of fiscal
year 2021, we expanded our beverages segment with the acquisition of an additional beverage company, expanding our product line. Product
sales include sales of our energy drinks, HighDrate CBD-infused energy waters, lemon-flavored beverages and apparel such as t-shirts and
hats. In early 2019, we expanded our operations with the creation of a distribution center, which now functions as our Distribution Segment.
Our Distribution Segment has one main revenue stream: product sales to convenience stores, grocery stores, or smoke and gift shops, which
complement our current product offering. Product sales include sales of our beverages, as well as beverages and snacks purchased for resale
from several other beverage producers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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. We expect that revenue will increase in fiscal year 2021 as distribution related to our current distributors affected by COVID-19
that have resumed distribution, will continue to see fewer impacts from the COVID-19 pandemic going forward. Despite the impact from COVID-19
on our revenues in the fiscal year 2020, we still anticipate to sign larger, more favorable agreements with larger, tier 1 and mid-size
distributors in our Beverages Segment during fiscal 2021.The following is a more detailed discussion of our financial condition and results
of operations for the period presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Three Months Ended March 31, 2021 compared to
the Three Months Ended March 31, 2020 </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Overview</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As reflected in the accompanying financial statements,
during the three months ended March 31, 2021, we incurred a net loss of approximately $1.8 million and used cash in operations of approximately
$424,400, compared to a net loss of approximately $594,900 and used cash in operations of approximately $260,000 for the three months
ended March 31, 2020. As of March 31, 2021, we had a stockholders&rsquo; deficit of approximately $4.1 million. The financial statements
of our newly acquired lemon-flavored beverages subsidiary are consolidated into the accompanying financial statements for the months of
February and March 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following is a more detailed discussion of our
financial condition and results of operations for the period presented, along with prior periods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents our net revenues, by
revenue source, and the period-over-period percentage change, for the period presented:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended March 31,</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">Revenue Source</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% Change</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 46%">Distributors</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">243,788</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">107,292</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 5%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">127</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Amazon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,502</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27,358</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">41</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Online Sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,204</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,189</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold Leaf Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">180,217</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,836</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">229</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Shipping</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,110</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,006</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Sales Returns and Allowances</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(23,413</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,624</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">546</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Net Revenues</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">462,408</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">202,057</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">129</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table presents our net revenues, by
revenue source, as a percentage of total net revenues for the periods presented:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended March 31,</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">Revenues</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 56%; text-align: left">Distributors and Resellers</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">53</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 12%; text-align: right">53</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Amazon</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Online Sales</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Gold Leaf Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">39</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">27</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD>Shipping</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Sales Returns and Allowances</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5</TD><TD STYLE="text-align: left">)%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2</TD><TD STYLE="text-align: left">)%</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 18pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2021, we reported
net revenues of approximately $462,400, which is an increase of approximately $260,400, or approximately 129%, compared to net revenues
of approximately $202,100 for the three months ended March 31, 2020. An increase of approximately $130,200 was attributed to our Beverages
Segment, while our Distribution Segment reported an increase in net revenue of approximately $125,500. We attribute this increase in sales
to an effort to sign more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains. These contracts
saw unforeseen delays and were additionally impacted by the COVID-19 pandemic during the fiscal year. The COVID-19 delayed the Company&rsquo;s
launch of a variety of new products during most of the 2020 fiscal year &ndash; drinks and non-drink line broadening items. We expect
that revenue will increase in the last three quarters of the fiscal year 2021 as distribution related to our current distributors affected
by COVID-19 that have resumed distribution, will continue to see fewer impacts from the COVID-19 pandemic going forward. We anticipate
to sign larger, more favorable agreements with larger, tier 1 and mid-size distributors in our Beverages Segment during the remaining
three quarter of fiscal 2021.We also attribute this increase to the acquisition of a beverage company that broadened our drink product
line in our Beverages Segment. In addition, we have continued to add drink and non-drink line broadening products to our Distribution
Segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Cost of Revenues</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of revenues consists primarily of expenses associated
with products sold to distributors and resellers, including product and shipping costs. Costs also include credit card fees, fees incurred
for sales that occur on Amazon.com, and other transaction fees related to the processing of consumer transactions. Typically, we expect
that the cost of revenues will increase as a direct correlation to increases in sales. Thus, our cost of revenues increases on an absolute
basis versus on a percentage of sales basis. At the same time, when sales increase, thereby increasing our orders with our co-packers,
our cost of products decreases because of the volume discounts we receive from our co-packers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the three months ended March 31, 2021, we reported
cost of revenues of approximately $313,900, which is an increase of approximately $168,000, or approximately 115%, compared to approximately
$146,000 for the three months ended March 31, 2020. This increase is attributed to an increase in sales in both our Beverages Segment
and Distribution Segment in the first quarter of fiscal 2021, compared to the prior year period. The cost of sales increase was slightly
below the increase in sales. This is attributed to broadening our product line in both our Beverages Segment and our Distribution Segment
with drinks and non-drink products with higher consumer demand, and a reduction in cost for larger purchase quantities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Selling, General and Administrative Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SG&amp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SG&amp;A expenses were approximately $569,000 for
the three months ended March 31, 2021, compared to approximately $647,200 million in the three months ended March 31, 2020, a decrease
of $78,200, or approximately 12%. The decrease in SG&amp;A expenses was primarily due to a decrease in salaries and wages of 52% attributed
to our Beverages Segment; a decrease in legal and accounting fees of 21% attributed to our corporate-related activities; and a decrease
in advertising and promotion of 25% attributed to our Beverages Segment. This decrease was offset by a significant increase in professional
fees of 11,900% attributed to our corporate related activities; a significant increase in insurance of 285% attributed to both our Beverages
Segment and our Distribution Segment; an increase of 13% in rent expense attributed to both our Beverages Segment and our Distribution
Segment; and a 285% increase in OTCM fees attributed to corporate-related expenses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Salaries and wages were approximately $212,000 in
the three months ended March 31, 2021, compared to approximately $443,000 for the three months ended March 31, 2020, a decrease of approximately
$231,000, which was attributed to our Beverages Segment. This decrease was the result of issuance of shares of the Company&rsquo;s common
stock made in the prior year to employees pursuant to their agreements. Legal and accounting fees were approximately $51,500 for the three
months ended March 31, 2021, a decrease of approximately $14,000, which was attributed to our corporate related activities. This decrease
was the result of audit related expenses in the prior year. Advertising and promotional fees were approximately $7,900 in the three months
ended March 31, 2021, compared to approximately $10,500 for the three months ended March 31, 2020, a decrease of approximately $2,600,
which was attributed to our Beverages Segment. This decrease was the result of slower sales during the first month of fiscal 2021 as distribution
related to our current distributors continued to be affected by COVID-19. Insurance expense was approximately $22,700 for the three months
ended March 31, 2021, compared to approximately $5,000 for the three months ended March 31, 2020, an increase of approximately $17,700.
This increase was attributed to both our Beverages Segment and our Distribution Segment and the result of signing larger, more favorable
agreements with larger, tier 1 and mid-size distributors and customers. Rent expenses were approximately $37,700 for the three months
ended March 31, 2021, compared to approximately $33,300 for the three months ended March 31, 2020, an increase of approximately $4,400.
This increase was attributed to both our Beverages Segment and our Distribution Segment and the result of our moving to a larger warehouse
facility that was necessary due to our anticipated growth. OTCM fees attributed to corporate-related expenses were approximately $26,200
for the three months ended March 31, 2021, compared to approximately $6,800 for the three months ended March 31, 2020, an increase of
approximately $19,400. This increase was the result of fees paid to the OTCM to have our Common Stock quoted on the OTCQB versus the OTC
Pink.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect that as we expand our business, operations,
and incur additional corporate-related expenses associated with having our Common Stock quoted on the OTCQB and being required to file
certain reports and other information with the SEC, SG&amp;A expenses will increase for both our Beverages Segment and Distribution Segment.
We anticipate hiring additional personal in fiscal 2021 that are integral to the success of our growing Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Net Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incurred a net loss of approximately $1.8 million
for the three months ended March 31, 2021, an increase of approximately $1.3 million compared to the previous year three months ending
March 31, 2020, which had a net loss of approximately $595,000 million. This net loss is primarily corporate-related expenses that are
necessary for our growth, which include interest expense related to the Warrant issued in connection with the Debentures and non-cash
expense on our derivative liability. The fair value of the Debentures will be re-measured each reporting period until the Debentures are
either converted or expire. In each reporting period during the term of the Debentures, the change in the fair value will either be recognized
as a non-cash expense or non-cash income. The change in the fair value of the Debentures is not impacted by our actual operations but
instead is strongly tied to the change in the market value of our Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Segments &ndash; Three Months Ended March 31,
2021 and 2020</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2021 and 2020,
we had two reportable segments: (i) Beverages Segment and (ii) Distribution Segment. Amounts that are not allocated to either of these
reportable segments is reported in &ldquo;Corporate and Eliminations.&rdquo; We evaluate performance and allocate resources based on
net revenue, cost of revenues, and gross profit. Information regarding the operations of these reportable segments is as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: center; text-indent: -10pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="7" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Three Months Ended</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; border-bottom: Black 1pt solid; font-weight: bold; text-align: left; text-indent: -10pt">Unaudited Segment Financial Data</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31, 2020</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Net revenue:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; width: 56%; text-indent: -10pt">Beverages</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">310,093</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 8%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 12%; text-align: right">179,927</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">180,351</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">54,836</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(28,036</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; font-weight: bold; text-align: left; text-indent: -10pt">Net revenue</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">462,408</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">202,057</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Cost of Revenues:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Beverages</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">193,369</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">138,063</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">128,750</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,610</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,199</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(32,706</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; font-weight: bold; text-indent: -10pt">Cost of Revenues</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">313,920</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">145,967</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: left; text-indent: -10pt">Gross Profit:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Beverages</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">116,724</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">202,057</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-indent: -10pt">Distribution</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">51,601</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">145,967</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 20pt; text-align: left; text-indent: -10pt">Corporate and Eliminations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(19,837</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">&mdash;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 30pt; font-weight: bold; text-align: left; text-indent: -10pt">Gross Profit</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">148,888</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">56,090</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Going Concern</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have incurred operating losses since inception
and have negative cash flow from operations since inception. As of March 31, 2021, we had a stockholders&rsquo; deficit of approximately
$4.1 million and we incurred a net loss of approximately $1.8 million during the three months ended March 31, 2021. We also utilized cash
in operations of approximately $424,400 during the three months ended March 31, 2021. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Lines of Credit</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Since inception, we have financed our operations primarily
through internally generated funds, private sales of stock, accruals of compensation, and the use of our lines of credit. In summary,
our lines of credit are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total Amount Available</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Interest Rate<BR> (per annum)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>Outstanding Principal Balance</B></P> <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B>as of<BR> March 31, 2021</B></P></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Accrued Interest as of March 31, 2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 40%; font-weight: bold; text-align: left">Kona Gold Line of Credit #1 &ndash; Related Party</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,500,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; text-align: right">3.75</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">1,372,651</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">48,757</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><B>Kona Gold Line of Credit #2<SUP>a</SUP></B></FONT></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">400,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.75</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">398,470</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">35,787</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="font-weight: bold; text-align: left">Gold Leaf Line of Credit &ndash; Related Party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">200,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.75</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">125,500</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">4,706</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0%">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt"><SUP>a</SUP></FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">This line of credit was provided by Matthew Nicoletti, an otherwise unaffiliated third party to whom we previously sold and issued certain shares of our Series B Preferred Stock (as then constituted) and Series C Preferred Stock (as then constituted), all of which have been converted into shares of our Common Stock and sold into the public market. Mr. Nicoletti is no longer the record or beneficial owner of any of our equity. There was no connection between our prior equity transactions with Mr. Nicoletti and our entry into this line of credit.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 32.4pt; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Notes Payable &ndash; Related Party</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We had the following outstanding notes payable from
a related party during the three months ended March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; text-indent: -10pt">Note (1)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-align: center; border-bottom: Black 1pt solid; text-indent: -10pt">Issuance Date</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Original Borrowing Amount</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Interest Rate</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Maturity Date</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Largest Outstanding Balance since January 1,<BR> 2018</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Outstanding Balance as of March 31, 2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 13%; text-align: left; text-indent: -10pt">Long-term Loan &ndash; Kona Gold</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 13%; text-align: left; text-indent: -10pt">October 31, 2018</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 11%; text-align: right">20,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 11%; text-align: right">0</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: left">April 4, 2022</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">20,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 10%; text-align: right">7,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Long-term Loan &ndash; Gold Leaf</TD><TD>&nbsp;</TD>
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">February 19, 2019</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">70,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">March 15, 2022</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">70,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">58,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each of the notes payable was issued by us in favor of Robert Clark, our President, Chief Executive Officer, Secretary, and Chairman of our Board.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 72pt"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Note Receivable &ndash; Branded Legacy</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 26, 2016, Robert Clark formed Elev8 Hemp, LLC,
a Delaware limited liability company (&ldquo;Elev8 Hemp&rdquo;), on behalf of Ryan Medico, our then-Chief Financial Officer. Mr. Medico
was the sole owner of and served as President of Elev8 Hemp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In June 2016, we entered into a letter of intent with
Elev8 Hemp to acquire it, such that it would become our wholly-owned subsidiary. Pursuant to the letter of intent, on June 7, 2016, we
entered into an Acquisition Agreement with Elev8 Hemp (the &ldquo;Elev8 Hemp Acquisition Agreement&rdquo;), whereby we agreed to acquire
100% of the ownership of Elev8 Hemp and, in exchange, we agreed to issue to Mr. Medico five million restricted shares of our Common Stock,
which had a fair market value of $50,000. The Elev8 Hemp Acquisition Agreement provided that, if we failed to adequately capitalize the
development of Elev8 Hemp to complete its objectives set forth in its business plan, Mr. Medico would have the option until March 31,
2018 to repurchase Elev8 Hemp from us for a purchase price of $50,000, which could be paid in shares of our Common Stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On October 10, 2016, we entered into a Membership
Interest Purchase Agreement (the &ldquo;Membership Interest Purchase Agreement&rdquo;) with Branded Legacy, to sell 100% of the issued
and outstanding membership interests of Elev8 Hemp to Branded Legacy in consideration of Branded Legacy&rsquo;s issuance to us of 200,000,000
shares of its common stock, par value $0.00001. In connection with this transaction, Mr. Medico became the Chief Executive Officer and
sole director of Branded Legacy. The parties desired to enter into the Membership Interest Purchase Agreement because we did not have
adequate capital to fund the development of Elev8 Hemp&rsquo;s business, as well as our own. Until July 2018, Mr. Medico also continued
to serve as our Chief Financial Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 14, 2017, our Board declared a dividend to
our stockholders of an aggregate of 53,196,608 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. On the record date, we had approximately 104
stockholders, all of whom received this dividend. After the payment of the dividend, we held 146,803,392 shares of common stock of Branded
Legacy.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On March 6, 2018, we entered into a Securities Exchange
and Settlement Agreement (the &ldquo;First Exchange Agreement&rdquo;) with Branded Legacy. Pursuant to the First Exchange Agreement, we
exchanged with Branded Legacy the remaining 146,803,392 shares of its common stock held by us for 2,746,723 shares of Branded Legacy&rsquo;s
Series D preferred stock. The shares of Series D preferred stock were initially convertible into 164,803,380 shares of Branded Legacy&rsquo;s
common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&rsquo;s Series D preferred stock
for its 10-year Promissory Note in our favor in the original principal amount of $1,500,000 (the &ldquo;Branded Legacy Note&rdquo;). The
Branded Legacy Note is unsecured, non-convertible, and all principal and accrued and unpaid interest thereon is due and payable on November
27, 2029.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In more recent discussions with our independent registered
public accounting firm, we determined that the Branded Legacy Note should be classified as a note receivable on our balance sheets as
of March 31, 2021 and December 31, 2020, with a full reservation due to current doubts about collectability due to the dollar amount and
duration of the term of the Branded Legacy Note, rather than disclosing the note receivable as an &ldquo;investment&rdquo; but not recording
it on the balance sheets. Because of this re-classification, the Branded Legacy Note is no longer an off-balance sheet arrangement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Paycheck Protection Promissory Note and Economic
Injury Disaster Loan</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On May 4, 2020, we entered into a Paycheck Protection
Promissory Note in the original principal amount of $95,161 (the &ldquo;PPP Loan&rdquo;) with Wells Fargo Bank, N.A. The PPP Loan was
made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the &ldquo;PPP&rdquo;), which was established
as part of the Coronavirus Aid, Relief and Economic Security Act (the &ldquo;CARES Act&rdquo;) and is administered by the U.S. Small Business
Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses
of the qualifying business. The current term of the PPP Loan is two years, with a maturity date of May 6, 2022 and it contains a favorable
fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan are deferred for the first six months of the term
of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly and may be prepaid by us at any time prior to
maturity with no prepayment penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">In January 2021, the Company
entered into a Paycheck Protection Promissory Note in the original principal amount of $117,487 (the &ldquo;PPP Loan 2&rdquo;) with Wells
Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the &ldquo;PPP&rdquo;),
which was established as part of the Coronavirus Aid, Relief and Economic Security Act the (&ldquo;CARES Act&rdquo;) and is administered
by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average
monthly payroll expenses of the qualifying business. The current term of the PPP Loan is five years, with a maturity date of January 2026
and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan are deferred for the
first six months of the term of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly and may be prepaid
by us at any time prior to maturity with no prepayment penalties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Under the terms of the CARES Act, recipients can apply
for and receive forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations,
based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs,
mortgage interest, rent or utility costs (collectively, &ldquo;Qualifying Expenses&rdquo;), and on the maintenance of employee and compensation
levels during a certain time period following the funding of the PPP Loan. The amount of loan forgiveness will be reduced if the borrower
terminates employees or reduces salaries during the eight-week period. We have used the proceeds of the PPP Loan for salaries and wages,
building lease expense, and utilities. However, no assurance is provided that we will be able to obtain forgiveness of the PPP Loan in
whole or in part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2020, we also received an advance in the amount
of $7,000 as part of the Economic Injury Disaster Loan program offered by the U.S. Small Business Administration. This advance was received
after we filed our application with regarding to the PPP. The advance was not included in any of the documentation related to the PPP
Loan. We are in the process of determining how this advance will be included as part of the PPP Loan forgiveness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>2020 Securities Purchase Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In May 2020, the Company completed the 2020 Private
Placement of the 2020 Debentures and the 2020 Warrant pursuant to the 2020 SPA with an otherwise unaffiliated third-party investor (the
&ldquo;Selling Stockholder&rdquo;). The Company sold and issued the First 2020 Debenture and granted the 2020 Warrant promptly after entering
in the 2020 SPA. The Company sold and issued the Second 2020 Debenture promptly after filing the 2020 Registration Statement initially
with the SEC. The Company sold and issued the Third 2020 Debenture promptly after the SEC declared the Registration Statement effective.
The 2020 Debentures are due 12 months from their respective issuance dates and are secured by all of the Company&rsquo;s assets and the
assets of each of its subsidiaries pursuant to that certain Security Agreement by and among the Selling Stockholder, the Company&rsquo;s
subsidiaries, and the Company. Initially, the 2020 Debentures are convertible at the lower of (i) the fixed conversion price, which is
$0.05 per share, subject to adjustment (the &ldquo;2020 Fixed Conversion Price&rdquo;), or (ii) 80% of the lowest daily volume weighted
average price (&ldquo;VWAP&rdquo;) of our Common Stock during the 15 trading days immediately preceding the conversion date, subject to
adjustment (the &ldquo;2020 Market Conversion Price&rdquo;). The 2020 Debentures contain an adjustment provision that, subject to certain
exceptions, reduces the conversion price if the Company issues shares of its Common Stock or common stock equivalents at a price lower
than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations
and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the 2020 Debentures.
The 2020 Debentures are subject to a &ldquo;conversion blocker&rdquo; such that the Selling Stockholder cannot convert any portion of
the 2020 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding
shares of the Common Stock following such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable
upon conversion of the 2020 Debentures or exercise of the 2020 Warrant that had not then been converted or exercised, respectively). The
Selling Stockholder can increase that 4.99% &ldquo;conversion blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice
to the Company. The 2020 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity
dates (or sooner if the Selling Stockholder converts the 2020 Debentures or otherwise accelerates the maturity date, as provided for in
the 2020 Debentures). Interest is payable either in cash or, if certain Equity Conditions (as defined in the 2020 Debentures) are then
satisfied, in shares of the Common Stock at the 2020 Market Conversion Price on the trading day immediately prior to the date paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the Company&rsquo;s option, it has the right to
redeem, in part or in whole, the outstanding principal and interest under the 2020 Debentures prior to their respective maturity dates;
<I>provided</I>, <I>that</I>, as of the date of the holder&rsquo;s receipt of the redemption notice, (i) the VWAP of the Common Stock
is less than the 2020 Fixed Conversion Price, initially $0.05 per share, and (ii) there is no Equity Conditions failure. The Company 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 &ldquo;Redemption Premium&rdquo;). The Company must provide the holder
15 business days&rsquo; advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2020 Debentures contain an adjustment provision
that, subject to certain exceptions, reduces the conversion price if the Company issues shares of the Common Stock or common stock equivalents
at a price lower than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2020 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the terms of the Registration Rights Agreement,
the Company agreed to file the Registration Statement with the SEC registering for resale the Conversion Shares and the Warrant Shares
within 45 calendar days following the closing of the 2020 Private Placement. The Company also agreed, among other things, to indemnify
the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration
of the Conversion Shares and the Warrant Shares held by the Selling Stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the 2020 SPA, the purchase price for the
First 2020 Debenture was $250,000, less $15,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo; of
$10,000 and $5,000 as a structuring fee. On December 23, 2020, the Company converted $100,000 of the principal of, and $12,274 of accrued
interest on, the First 2020 Debenture into 8,255,438 shares of the Company&rsquo;s common stock. On January 25, 2021, the Company converted
$150,000 of the principal of, and $1,118 of accrued interest on, the First 2020 Debenture into 7,094,732 shares of the Company&rsquo;s
common stock, see Note 11, <I>equity transactions</I>. At March 31, 2021, no balance remains on any of the 2020 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the 2020 SPA, the purchase price for the
Second 2020 Debenture was $250,000, less $10,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo; of
$10,000 fee. On January 25, 2021, the Company converted $100,000 of the principal of, and $10,410 of accrued interest on, the Second 2020
Debenture into 5,183,613 shares of the Company&rsquo;s common stock. On February 19, 2021, the Company converted $150,000 of the principal
of, and $855 of accrued interest on, the Second 2020 Debenture into 7,252,634 shares of the Company&rsquo;s common stock see Note 11,
<I>equity transactions</I>. At March 31, 2021, no balance remains on any of the 2020 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the 2020 SPA, the purchase price for the
Third 2020 Debenture was $500,000, less $10,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo; of
$10,000 fee. On January 12, 2021, the Company converted $200,000 of the principal of, and $1,425 of accrued interest on, the First 2020
Debenture into 10.887,819 shares of the Company&rsquo;s common stock, see Note 11, <I>equity transactions</I>. At March 31, 2021, the
principal balance of the Third 2020 Debenture is $300,000. As of the date of this Quarterly Report, no balance remains on any of the 2020
Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>2021 Securities Purchase Agreement</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In February 2021, the Company completed a private
placement transaction (the &ldquo;2021 Private Placement&rdquo;) of two secured convertible debentures (the &ldquo;2021 Debentures&rdquo;),
convertible for up to 154,958,678 shares (the &ldquo;2021 Conversion Shares&rdquo;) of Common Stock and granted a Warrant to purchase
Common Stock (the &ldquo;2021 Warrant&rdquo;), exercisable for up to 50,000,000 shares of Common Stock (the &ldquo;2021 Warrant Shares&rdquo;),
pursuant to that certain Securities Purchase Agreement between the Selling Stockholder and the Company, dated as of February 10, 2021
(the &ldquo;2021 SPA&rdquo;). The Company sold and issued the initial 2021 Debenture (the &ldquo;First 2021 Debenture&rdquo;) and granted
the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second 2021 Debenture (the &ldquo;Second
2021 Debenture&rdquo;) promptly after the SEC declares effective the 2021 Registration Statement (as defined below). On May 5, 2021, the
Company and the Selling Stockholder entered into a Limited Amendment Agreement, pursuant to which the partis agreed to a partial Second
Closing, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture in the face amount of $200,000
for a purchase price of $192,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2021 Debentures are due 12 months from their respective
issuance dates and are secured by all of the Company&rsquo;s assets and the assets of each of its subsidiaries pursuant to that certain
Security Agreement by and among the Selling Stockholder, the Company&rsquo;s subsidiaries, and the Company. Initially, the 2021 Debentures
are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the &ldquo;2021 Fixed
Conversion Price&rdquo;), or (ii) 80% of the lowest daily volume weighted average price (&ldquo;VWAP&rdquo;) of our Common Stock during
the 15 trading days immediately preceding the conversion date, subject to adjustment (the &ldquo;2021 Market Conversion Price&rdquo;).
The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if the Company issues
shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the 2021 Debentures.
Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events
will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a &ldquo;conversion
blocker&rdquo; such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such conversion (excluding,
for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures or exercise of the 2021
Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% &ldquo;conversion
blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice to the Company. The 2021 Debentures accrue interest at an annual
rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the 2021 Debentures
or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable either in cash or, if certain
Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock at the 2021 Market Conversion
Price on the trading day immediately prior to the date paid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At the Company&rsquo;s option, it has the right to
redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity dates;
provided, that, as of the date of the holder&rsquo;s receipt of the redemption notice, (i) the VWAP of the Common Stock is less than the
2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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 &ldquo;Redemption Premium&rdquo;). The Company must provide the holder 15 business
days&rsquo; advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem
plus the applicable Redemption Premium.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2021 Debentures contain an adjustment provision
that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock equivalents
at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the 2021 SPA, the purchase price for the
First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo; of
$36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an &ldquo;original issue discount.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the 2021 Private Placement, the
Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has a
three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails to
maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default (as
defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a &ldquo;cashless&rdquo; basis. &ldquo;Event
of Default&rdquo; means an event of default under the 2021 SPA or the 2021 Debentures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2021 Warrant is subject to an &ldquo;exercise
blocker&rdquo; such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% &ldquo;exercise blocker&rdquo;
to 9.99% upon at least 65 days&rsquo; prior written notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the terms of the 2021 Registration Rights
Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the &ldquo;2021 Registration
Statement&rdquo;) with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the 2021 SPA, the purchase price for the
First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the &ldquo;original issue discount&rdquo; of
$36,000 and $5,000 as a structuring fee. At March 31, 2021, the principal balance of the First 2021 Debenture is $900,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Derivative Liability</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2020 Debentures and the 2021 Debentures have been
accounted for utilizing ASC 815. The Company has incurred a liability for the estimated fair value of the 2020 Debentures. The estimated
fair value of the 2020 Debentures has been calculated using the Black-Scholes fair value option-pricing model with key input variables
provided by management, as of the date of issuance, with the valuation offset against additional paid in capital, and at each reporting
date, with changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company identified embedded
features in the 2020 Debentures and the 2021 Debentures, which caused the 2020 Debentures and the 2021 Debentures to be classified as
a liability. These embedded features included the right for the holder to request for the Company to settle the amounts owed pursuant
to the 2020 Debentures and the 2021 Debentures to the holder by paying an amount of cash equal to the Black-Scholes value of the remaining
unexercised portion of the 2020 Debentures and the 2021 Debentures on the date of the consummation of a fundamental transaction. The accounting
treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value
of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each
subsequent balance sheet date.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The derivative liabilities were valued using Black-Scholes
pricing model with the following average assumptions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">March 31,&nbsp;2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 70%">Stock Price</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">0.0327</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Exercise Price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0.0276</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Expected Life</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">99.5</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Dividend Yield</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Risk-Free Interest Rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">.06</TD><TD STYLE="text-align: left">%</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">Fair Value</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">628,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

<!-- Field: Page; Sequence: 68; Value: 54 -->
    <DIV STYLE="margin-top: 6pt; margin-bottom: 6pt; border-bottom: Black 2pt solid"><P STYLE="font-size: 10pt; text-align: center; margin-top: 0pt; margin-bottom: 0pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->65<!-- Field: /Sequence --></P></DIV>
    <DIV STYLE="break-before: page; margin-top: 6pt; margin-bottom: 6pt"><P STYLE="margin: 0pt">&nbsp;</P></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table summarizes the changes in the
Company&rsquo;s assets and liabilities measured at fair value as of March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">March 31, 2021</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Quoted prices in Active Markets for Identical Assets (Level 1)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant Other Observable Inputs (Level 2)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center; border-bottom: Black 1pt solid">Significant Unobservable Inputs<BR> (Level 3)</TD></TR>
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="3" STYLE="text-align: center">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 40%; text-align: left; padding-bottom: 1pt; text-indent: -10pt; padding-left: 10pt">Convertible promissory notes with embedded conversion option</TD><TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">627,018</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right">627,018</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 3%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 10%; border-bottom: Black 1pt solid; text-align: right"></TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right"></TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following table sets forth a summary of change
in fair value of the Company&rsquo;s derivative liabilities for the quarter ended March 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt">Fair value, January 1, 2020</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; width: 70%; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debenture</TD><TD STYLE="width: 10%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; border-bottom: Black 1pt solid; text-align: right">148,628</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">&nbsp;Fair value, June 30, 2020</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">148,628</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(39,725</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">108,903</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-indent: -10pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;<B>Fair value, September 30, 2020</B></FONT></TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">217,806</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(69,051</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2020 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">212,397</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Fair value, December 31, 2020</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">$</TD><TD STYLE="font-weight: bold; text-align: right">361,152</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Change in fair value of embedded conversion features of debenture included in earnings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(202,443</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; text-align: left; text-indent: -10pt">Embedded conversion option liability recorded in connection with the issuance of 2021 debentures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">468,309</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="padding: 0pt 0pt 0pt 10pt; font-weight: bold; text-indent: -10pt">Fair value, March 31, 2021</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">627,018</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>2020 Warrant and 2021 Warrant</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company also granted the 2020 Warrant and the
2021 Warrant to purchase up to an aggregate of 20 million shares and 50 million shares of Common Stock, respectively. The 2020 Warrant
and the 2021 Warrant each has a three-year term and each is immediately exercisable at an exercise price of $0.05 per share for the 2020
Warrant and $0.03 per share for the 2021 Warrant, each subject to adjustment. If the Company fails to maintain an effective registration
statement with the SEC covering the resale of the 2020 Warrant Shares and the 2021 Warrant Shares, or if an Event of Default (as defined
below) has occurred and is continuing, then the holder may exercise, respectively, the 2020 Warrant and the 2021 Warrant on a &ldquo;cashless&rdquo;
basis. &ldquo;Event of Default&rdquo; means an event of default under the 2020 SPA and the 2021 SPA or the 2020 Debentures and the 2021
Debentures, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2020 Warrant and the 2021 Warrant, respectively,
contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common
Stock or common stock equivalents at a price lower than the then-current exercise price of the 2020 Warrant and the 2021 Warrant, respectively.
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 2020 Warrant and the 2021 Warrant, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The 2020 Warrant and the 2021 Warrant, respectively,
is subject to an &ldquo;exercise blocker&rdquo; such that the Selling Stockholder cannot exercise any portion, respectively, of the 2020
Warrant that and the 2021 Warrant would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued
and outstanding shares of the Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common
Stock issuable, respectively, upon exercise of the 2020 Warrant and the 2021 Warrant or conversion of the 2020 Debentures and the 2021
Debentures, respectively, that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99%
&ldquo;exercise blocker&rdquo; to 9.99% upon at least 65 days&rsquo; prior written notice to the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">During the year ended December 31, 2020, the Company
granted the 2020 Warrant that was immediately exercisable for up to 20,000,000 shares of Common Stock. During the three months ended March
31, 2021, the Company granted the 2021 Warrant that was immediately exercisable for up to 50,000,000 shares of Common Stock. The 2020
Warrant and the 2021 Warrant, respectively, was fully expensed as an interest expense related to the 2020 Warrant and the 2021 Warrant
issued in connection with the consummation of the transactions contemplated by the 2020 SPA and 2021 SPA, respectively, and no liability
was recorded as of March 31, 2021 and December 31, 2020, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Cash Flows</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In summary, our use of cash has been as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the Three Months Ended March 31, 2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 70%; text-align: left">Net cash used in operating activities</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">(424,389</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net cash used in investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">(1,306,156</TD><TD STYLE="text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Net cash provided by financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,673,578</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Operating Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash provided by or used in operating activities primarily
consists of net income adjusted for certain non-cash items, including depreciation, amortization, stock-based payments, interest expense
related to the Warrants issued in the two private placements, and the effect of changes in working capital and other activities. Cash
used in operating activities for the three months ended March 31, 2021 was approximately $424,400 and consisted of a net loss of approximately
$1.8 million, adjustments for non-cash items, including adjustments related to the issuance of shares of our Common Stock for an acquisition,
interest expense related to the two warrant, and depreciation of approximately $1.3 million, and approximately $61,800 provided by working
capital and other activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Investing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash used in investing activities for the three months
ended March 31, 2021 was approximately $1.3 million and was attributable to capital expenditures of approximately, $30,200, and goodwill
of approximately $1.28 million, which was attributed to the S and S acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash provided by financing activities for three months
ended March 31, 2021 was approximately $1.7 million and was due to proceeds from lines of credit of approximately $3,000, proceeds from
convertible debt of approximately $913,800 million, proceeds from a note payable for the S and S acquisition, proceeds from the PPP Loan
of approximately $117,500, and $3,000 was used to pay principal on a note payable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Non-Cash Investing and Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the three months ended March 31, 2021, there were
no non-cash investing and financing activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Off-Balance Sheet Arrangements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At March 31, 2021, we had no off-balance sheet arrangements,
commitments, or guarantees that require additional disclosure or measurement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Critical Accounting Policies</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accounting policies that we follow are set forth
in Note 2, <I>Summary of Significant Accounting Policies</I>, of our consolidated financial statements for the three months ended March
31, 2021. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Leases</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 1, 2019, we adopted the Financial Accounting
Standards Board&rsquo;s (&ldquo;FASB&rdquo;) Accounting Standards Update 2016-02, <I>Leases (Topic 842)</I> (&ldquo;ASC Topic 842&rdquo;),
which requires an entity to recognize a liability and corresponding asset for leases that meet certain criteria. We applied ASC Topic
842 using the modified retrospective approach. Under this approach, we applied the new standards to all new leases, and leases which have
remaining obligations for financial statements issued for fiscal years beginning after December 15, 2018. We elected the package of practical
expedients permitted under the transition guidance, which allowed us to carryforward historical lease classification, and not reassess
(i) whether a contract was or contained a lease, and (ii) initial direct costs for any leases that existed prior to January 1, 2019. Under
this method, we did not restate comparative periods in our financial statements. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Please refer to Note 15, <I>Lease Liabilities, </I>to
our consolidated financial statements for the three months ended March 31, 2021 for additional information related to our right-of-use
assets and lease liabilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Revenue Recognition and Deferred Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We sell our products, which
includes our hemp energy drink, CBD energy water, CBD water, lemon-flavored beverages, and logo apparel, to online customers or through
resellers and distributors. In evaluating the timing of the transfer of control of products to customers, we consider several indicators,
including significant risks and rewards of products, our right to payment, and the legal title of the products. We recognize revenue from
product sales to customers, distributors, and resellers when products that do not require further services by us are shipped, when there
are no uncertainties surrounding customer acceptance, and when collectability is reasonably assured. Sales are made to customers under
terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling, represent
revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products
sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We also sell our products, and beverages purchased
for resale from several other beverage manufacturers to convenience stores, grocery stores, and smoke and gift shops. In evaluating the
timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of
products, our right to payment, and the legal title of the products. We recognize revenue from product sales to resellers when products
that do not require further services by us are shipped or delivered, when there are no uncertainties surrounding customer acceptance and
when collectability is reasonably assured. Cash received by us prior to shipment is recorded as deferred revenue. Sales are made to customers
under terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling,
represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of
products sold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On January 1, 2019, we adopted ASU No. 2014-09, <I>Revenue
from Contracts with Customers (Topic 606)</I> (&ldquo;ASC Topic 606&rdquo;). The underlying principle of ASC Topic 606 is to recognize
revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation of Topic
ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To apply these principles, ASC Topic 606 outlines
a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying the contract(s) or agreement(s) with a customer;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying the separate performance obligations in the contract or agreement;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Determining the transaction price;</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Allocating the transaction price to the separate performance obligations in the contract or agreement; and</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 72px">&nbsp;</TD>
    <TD STYLE="width: 24px"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recognizing revenue as each performance obligation is satisfied.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 0 36pt; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to ASC Topic 606, we recognize revenue when
performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control, including the
risks and rewards of ownership. With respect to us, performance is deemed to occur upon shipment or delivery of products to our customers
based on the written contract terms, which is also when control is transferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We evaluated the guidance in ASC 606-10-50-5 and the
related implementation guidance to determine disaggregation of revenues that would be meaningful. The majority of our revenue earned from
our Beverages Segment and our Distribution Segment is recognized when we satisfy a single performance obligation by transferring control
of our products to a customer. We do not have significant financing components or payment terms, and we do not have any material unsatisfied
performance obligations. Our revenues are obtained in similar geographical locations within the United States. Furthermore, the operations
in each of our reporting segments are expected to have essentially the same future prospects, similar gross margins, sales trends, and
the nature of our products and customers are essentially the same. The sales from our beverage product types are organized as one reportable
segment, which we refer to as the Beverages Segment, and the sales of our products and products that are purchased from resellers that
are distributed by Gold Leaf is organized as our second reportable segment, which we refer to as the Distribution Segment. We have also
determined that disaggregated revenue by net sales by revenue source would be meaningful and allow investors to understand our business
activities, historical performance, or future prospects. Disaggregated sales by revenue source, which includes sales to distributors,
online sales, sales through Amazon, and Gold Leaf distribution sales. This is the same information used by our Chief Operating Decision
Maker for evaluating the financial performance of our operations and making resource decisions. We also sell merchandise and apparel that
comprises approximately 1% of our gross annual sales, and solely exists to promote our beverages. Therefore, our merchandise and apparel
products are not a reportable segment. Merchandise and apparel sales are included with the gross sales for our Beverages Segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Accounts Receivable and Allowance for Doubtful Account Receivable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&rsquo;s
or reseller&rsquo;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Inventory</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 inventory consists almost entirely of finished and unfinished goods, and freight, which include CBD energy waters, CBD waters,
hemp energy drinks, lemon-flavored beverages, 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, 2021, we had approximately $861,700 of product in inventory, which was an increase of approximately
$201,200, compared to approximately $660,500 at December 31, 2020. We expect the balance of inventory to increase in direct relation to
the increase in sales that we expect. See Note 2, <I>Summary of Significant Accounting Policies</I>, <I>Subsection F</I>, <I>Inventories,</I>
of our consolidated financial statements for the year ended March 31, 2021, for an additional description of our inventory that had a
material effect on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Goodwill and Intangible Assets</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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 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. We have
selected December 31 as the date to perform the annual impairment test.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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.&nbsp;Intangible assets are reported on the balance sheet at cost less accumulated amortization. We have selected December
31 as the date to perform the annual impairment test. See Note 2, <I>Summary of Significant Accounting Policies, Subsection H, Goodwill
and Intangible Assets, </I>of our consolidated financial statements for the three months ended March 31, 2021, for an additional description
of intangible assets that had a material effect on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Stock-Based Compensation</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">FASB&rsquo;s ASC Topic 718, Stock Compensation (formerly,
FASB Statement 123R), prescribes accounting and reporting standards for all stock-based payment transactions in which employee and non-employee
services are acquired. We measure the cost of employee and non-employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. Fair value for restricted stock awards is valued using the closing price of our Common
Stock on the date of grant. For our three months ended March 31, 2021, and 2020, we recognized stock-based compensation expense of approximately
$270,900, and $318,500, respectively. We had a balance in accrued stock-based compensation at March 31, 2021 and December 31, 2020 of
approximately $1.4 million, respectively. See Note 6, <I>Stock-Based Compensation,</I> of our consolidated financial statements for the
three months ended March 31, 2021 for an additional description of our stock-based compensation that had a material effect on our consolidated
financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Related Party Transactions&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 8, <I>Related Party Transactions, </I>to
our consolidated financial statements for the three months ended March 31, 2021 for an additional description of related party transactions
that had a material effect on our consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>S and S Acquisition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">On January 21, 2021, we entered
into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders, pursuant to which we acquired S and S and its line
of lemon-flavored beverages (the &ldquo;S and S Acquisition&rdquo;). To consummate the S and S Acquisition, we filed a Certificate of
Merger with the Wisconsin Department of Financial Institutions on February 1, 2021. In consideration with the S and S Acquisition, we
agreed to pay an aggregate of $1,050,000 (the &ldquo;Aggregate Acquisition Payments&rdquo;), the majority of which is allocated to certain
creditors of S and S (including one of its shareholders) and approximately $89,000 of which (the &ldquo;Remaining Acquisition Payments&rdquo;)
is allocated to its shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid within two weeks of the
closing of the transaction. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled
to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent
to $2.00 per case of OOH LA Lemin (the product line of S and S) that we sell until the Aggregate Acquisition Payments have been paid in
full. In addition to the Aggregate Acquisition Payments, we also assumed and agreed to pay certain other liabilities of S and S as set
forth in the Merger Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Emerging Growth Company Status</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On April 5, 2012, the JOBS Act, was enacted. The JOBS
Act provides that, among other things, an &ldquo;emerging growth company&rdquo; can take advantage of an extended transition period for
complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting
standards until those standards would otherwise apply to private companies. As an emerging growth company, we have irrevocably elected
to take &ldquo;opt out&rdquo; of taking advantage of the extended transition period afforded by the JOBS Act for the implementation of
new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on
which adoption of such standards is required for non-emerging growth public companies on a case-by-case basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We intend to rely on certain of the other exemptions
and reduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not required to, among other things,
(i) provide an auditor&rsquo;s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b),
and (ii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor&rsquo;s report providing additional information about the audit and the financial statements (auditor
discussion and analysis).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We will remain an emerging growth company until the
earlier to occur of (1) the last day of our fiscal year (a) following the fifth anniversary of the declaration of effectiveness of our
Registration Statement on Form S-1 (December 31, 2020), (b) in which we have total annual gross revenues of at least $1.07 billion, or
(c) in which we are deemed to be a &ldquo;large accelerated filer&rdquo; under the rules of the SEC, which means the market value of our
common shares that is held by non-affiliates exceeds $700 million as of the last day of our second quarter, and (2) the date on which
we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We are also a &ldquo;smaller reporting company&rdquo;
meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result
of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal
year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates
is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the
market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease
to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller
reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited
financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced
disclosure obligations regarding executive compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Recently Issued Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 2, <I>Summary of Significant Accounting
Policies, Subsection S, Recently Issued Accounting Pronouncements,</I> to our consolidated financial statements for the three months
ended March 31, 2021 for a discussion of recent accounting pronouncements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center"><B>S AND S BEVERAGE, INC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>The following discussion and analysis of the results
of operations and financial condition for the one month January 31, 2021 and should be read in conjunction with the financial statements
and related notes and the other financial information that are included elsewhere herein. This discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results, or
other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant
business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation
to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those set forth under the &ldquo;Risk Factors,&rdquo; &ldquo;Cautionary
Note Regarding Forward-Looking Statements,&rdquo; and &ldquo;Description of Business&rdquo; sections herein. We use words such as &ldquo;anticipate,&rdquo;
&ldquo;estimate,&rdquo; &ldquo;plan,&rdquo; &ldquo;project,&rdquo; &ldquo;continuing,&rdquo; &ldquo;ongoing,&rdquo; &ldquo;expect,&rdquo;
&ldquo;believe,&rdquo; &ldquo;intend,&rdquo; &ldquo;may,&rdquo; &ldquo;will,&rdquo; &ldquo;should,&rdquo; &ldquo;could,&rdquo; and similar
expressions to identify forward-looking statements. We and our representatives may from time to time make written or oral statements that
are &ldquo;forward-looking,&rdquo; including statements contained herein. 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 &ldquo;expect,&rdquo; &ldquo;anticipate,&rdquo; &ldquo;intend,&rdquo; &ldquo;plan,&rdquo;
&ldquo;believe,&rdquo; &ldquo;seek,&rdquo; &ldquo;estimate,&rdquo; &ldquo;project,&rdquo; &ldquo;forecast,&rdquo; &ldquo;may,&rdquo; &ldquo;should,&rdquo;
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.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We undertake no obligation to update or revise any
of the forward-looking statements 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; padding-right: 0.8pt; font: 10pt Times New Roman, Times, Serif"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inadequate
    capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="font: 10pt Times New Roman, Times, Serif; padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our
    failure to earn revenues or profits;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding: 0pt; text-align: justify; text-indent: 0pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Potential
    fluctuation in our financial results;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Rapid
    and significant changes in markets;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Litigation
    with or legal claims and allegations by outside parties;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Impacts
    from the COVID-19 pandemic; and</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Insufficient
    revenues to cover operating costs.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following discussion should be read in conjunction
with the financial statements and the notes thereto which are included herein. 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B></B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B>Results of Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>One Month Ended January 31, 2021 compared to
the One Month Ended January 31, 2020</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Overview</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We sell our Lemin Superior Lemonade, now named OOH
LA Lemin. Our business was formed in 2018 and net revenues increased from $278,000 in our initial year of operations to approximately
$865,000 in fiscal year 2019, our first full year of operations. The COVID-19 pandemic resulted in reduced net revenues for our 2020 fiscal
year. For the first month ended January 31, 2021, we had net revenues of approximately $600, a decrease of approximately $10,500 from
the previous one month ended January 31, 2020. This decrease was anticipated, and we anticipate that growth in our business will restart
in the last eleven months of 2021 as the effects of the pandemic begin to recede and by virtue of our acquisition by Kona Gold Beverage,
Inc. (&ldquo;Kona Gold&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our decrease in revenue is primarily due to the effects
of the COVID-19 pandemic, and a halt in operations as a result of finalizing our acquisition by Kona Gold. The following is a more detailed
discussion of our financial condition and results of operations for the period presented.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The decrease in our net revenues from our one month
ended January 31, 2020 to our January 31, 2021 fiscal year resulted primarily from a decrease in operations in during our acquisition
by Kona Gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Cost of Revenue</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of revenue consists primarily of expenses associated
with the products sold to distributors and resellers and consumers, including product and shipping costs. Typically, we expect that the
cost of revenue will increase overall as a direct correlation to increases in sales. However, due to the decrease in sales, we had a correlating
decrease in the cost of revenue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cost of revenue for our one month ended January 31,
2021 was approximately $1,100 (or 198% of net revenue), which was a decrease of approximately $35,500, or 97%, compared to our one month
ended January 31, 2020, in which cost of revenue was approximately $36,600 (or 318% of net revenues). This decrease is directly related
to the decrease in net revenues. The high percentage of net revenue is primarily the result of fees charged to the Company for product
space, or slotting fees, by our customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We expect cost of revenue as a percentage of net revenues
to rebound, if not to improve by virtue of the expected receding effects of the COVID-19 pandemic and our acquisition by Kona Gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Selling, General and Administrative Expenses</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SG&amp;A expenses consist primarily of professional
fees, salaries and wages, advertising, travel expenses, and general office and administrative expenses related to maintaining our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SG&amp;A expenses decreased by approximately $54,400
to approximately $2,900 in our one month ended January 31, 2021, from approximately $57,300 in our one month ended January 31, 2020. The
decrease in SG&amp;A expenses was primarily due to a decrease in all expenses in preparation for our acquisition by Kona Gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Net Loss</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We incurred a net loss of approximately $3,500 in
our one month ended January 31, 2021, a decrease of $78,900, as compared to a net loss of approximately $82,400 in our one month ended
January 31, 2020. This decrease in net loss is primarily due to the decrease in SG&amp;A expenses more than offsetting the decrease in
gross profit. We expect that both gross profit and SG&amp;A expenses will increase on a going forward basis by virtue of the expected
receding effects of the COVID-19 pandemic and our acquisition by Kona Gold.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Going Concern</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We have incurred operating losses since inception
and have negative cash flow from operations since inception. As of January 31, 2021, we had a stockholders&rsquo; deficit of approximately
$659,500 and we incurred a net loss of approximately $3,500 during the one month ended January 31, 2021. We also utilized cash in operations
of approximately $26,700 during the one month ended January 31, 2021. 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 believe
that our acquisition by Kona Gold will provide sufficient financing to continue our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">There is no assurance that we will ever be profitable
or that our acquisition by Kona Gold will provide sufficient financing to sustain and increase our operations in accordance with our business
plan. The 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Notes Payable &ndash; Related Party</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We had the following outstanding notes payable from
a related party during the one month ended January 31, 2021:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Initial principal balance of $200,000 and 8% interest per annum (incurred in 2018 fiscal year). At January 31, 2021, the principal balance was $113,761.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Initial principal balance of $612,700 and 8% interest per annum (incurred in 2019 fiscal year). At January 31, 2021, the principal balance was $200,000.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Initial principal balance of $300,000 and 2% interest per annum (incurred in 2020 fiscal year). At January 31, 2021, the principal balance was $300,000.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in">&nbsp;</TD>
    <TD STYLE="width: 0.25in"><FONT STYLE="font-size: 10pt">&#9679;</FONT></TD>
    <TD STYLE="text-align: justify"><FONT STYLE="font-size: 10pt">Initial principal balance of $200,000 and 0% interest per annum (incurred in 2020 fiscal year). At January 31, 2021, the principal balance was $198,000.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The future maturities of the related parties&rsquo;
notes payable are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 10pt">December 31, 2021 &ndash; December 31, 2022</FONT></TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 70%; text-align: left"><FONT STYLE="font-size: 10pt">November 1, 2023</FONT></TD><TD STYLE="width: 10%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 18%; border-bottom: Black 1pt solid; text-align: right">811,761</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">811,761</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In connection with the acquisition of the Company
by Kona Gold, all outstanding notes payable are being repaid in accordance with the schedule set forth in the acquisition agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><B><I>Cash Flows</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">In summary, our use of cash has been as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="3" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For the One Month Ended January 31, 2021</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="width: 70%; text-align: left">Net cash used in operating activities</TD><TD STYLE="width: 10%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 18%; text-align: right">(26,696</TD><TD STYLE="width: 1%; text-align: left">)</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net cash used in investing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">0</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: bottom; background-color: rgb(204,238,255)">
    <TD STYLE="text-align: left">Net cash provided by financing activities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">10,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
  </TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Operating Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash provided by or used in operating activities for
the one month ended January 31, 2021 was approximately $26,700, which consisted of the net amounts of cash provided by or used in accounts
receivable, inventory, accounts payable, interest payable, and customer payments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Investing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We did not have any cash provided by or used in investing
activities for the one month ended January 31, 2021.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Cash provided by financing activities for the one
month ended January 3, 2021 was approximately $10,000, all of which was due to notes payable from a related party.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Non-Cash Investing and Financing Activities</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">For the month ended January 31, 2021, there were no
non-cash investing and financing activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><I>Off-Balance Sheet Arrangements</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">At January 31, 2021, we had no off-balance sheet
arrangements, commitments, or guarantees that require additional disclosure or measurement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><I>Critical Accounting Policies</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our discussion and analysis of results of operations
and financial condition are based upon our financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of our 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accounting policies that we follow are set forth
in Note 2, <I>Summary of Significant Accounting Policies</I>, of our financial statements for the one month ended January 31, 2021, as
included in our financial statements. These accounting policies conform to accounting principles generally accepted in the United States,
and have been consistently applied in the preparation of the financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><I>Revenue Recognition</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We sell our Lemin Superior
Lemonade, now named OOH LA Lemin, through resellers and distributors. In evaluating the timing of the transfer of control of products
to our 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 distributors and resellers when products that do not require
further services by us are shipped, when there are no uncertainties surrounding product acceptance, and when collectability is reasonably
assured.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">On January 1, 2019, we adopted ASU No. 2014-09, <I>Revenue from Contracts
with Customers (Topic 606)</I> (&ldquo;ASC Topic 606&rdquo;). The underlying principle of ASC Topic 606 is to recognize revenue to depict
the transfer of goods or services to a customer at the amount expected to be collected. The implementation of Topic ASC 606 had no impact
on the prior period financial statements and no cumulative effect adjustment was recognized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">To apply these principles, ASC Topic 606 outlines
a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 0.25in; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 0.25in; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying
    the contract(s) or agreement(s) with a customer;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Identifying
    the separate performance obligations in the contract or agreement;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Determining
    the transaction price;</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Allocating
    the transaction price to the separate performance obligations in the contract or agreement; and</FONT></TD></TR>

<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</FONT></TD>
    <TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Recognizing
    revenue as each performance obligation is satisfied.</FONT></TD></TR>
  </TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to ASC Topic 606, we recognize revenue when
performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control, including the
risks and rewards of ownership. With respect to us, performance is deemed to occur upon shipment or delivery of products to our customers
based on the written contract terms, which is also when control is transferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We evaluated the guidance in ASC 606-10-50-5 and the
related implementation guidance to determine if disaggregation of revenues that would be meaningful. Our revenue is earned from our sale
of Lemin Superior Lemonade, now named OOH LA Lemin, and is recognized when it satisfies a single performance obligation by transferring
control of its products to a customer. We do not have significant financing components or payment terms, and we do not have any material
unsatisfied performance obligations. Our revenues are obtained in similar geographical locations within the United States. The sales from
our beverages are organized as one reportable segment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Accounts Receivable and Allowance for Doubtful Account Receivable</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">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&rsquo;s
or reseller&rsquo;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. No bad
debt was recorded in the accompanying statements of income for one month ended January 31, 2021 and 2020, respectively. Management will
review annually to determine provisions and record an allowance as deemed necessary. In the opinion of management, a provision is deemed
necessary for allowances for the one month ended January 31, 2021 and year ended December 31, 2020. The balance of allowance for Uncollectible
Accounts as of January 31, 2021 and December 31, 2020 is $24,280, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Inventory</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Our inventory is valued at the lower cost or net realizable
value. At the end of one month ended January 31, 2021, our inventory consisted almost entirely of finished goods and raw materials (approximately
$240,800), which was no increase from inventory at the end of the prior year ended December 31, 2020. The no change in inventory is primarily
due to the decrease in operations for our acquisition by Kona Gold. We periodically evaluate and adjust inventories for obsolescence.
In the opinion of management, no provision for obsolescence is deemed necessary. As of the balance sheet dated January 31, 2021 and December
31, 2020, all inventory is current.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Related Party Transactions&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 4, <I>Related Party Transactions,</I> to
our financial statements for the one month ended March 31, 2021 for an additional description of related party transactions that had a
material effect on our financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>Recently Issued Accounting Pronouncements</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">See Note 2, <I>Summary of Significant Accounting
Policies, Subsection P, Recently Issued Accounting Pronouncements,</I> to our financial statements for the one month ended January 31,
2021 included in our financial statements for a discussion of recent accounting pronouncements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_009"></A>ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a Smaller Reporting Company, we are not required
to provide the information required by this Item.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_010"></A>ITEM 4. CONTROLS AND PROCEDURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Evaluation of Disclosure control and Procedures</U>.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March
31, 2021, the period covered in this Report, our disclosure controls and procedures <FONT>were not effective</FONT>
to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Changes in Internal Control Over Financial Reporting</U>.
There were no changes in the Company&rsquo;s internal control over financial reporting during the quarter ended March 31, 2021, that have
materially affected, or are reasonably likely to materially affect, the Company&rsquo;s internal control over financial reporting.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><U>Inherent Limitations on the Effectiveness of Controls</U></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Management does not expect that our disclosure controls
and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal
control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, have been or will be detected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any
system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness
to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in
the degree of compliance with policies or procedures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_011"></A>PART II &ndash; OTHER INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_012"></A>ITEM 1. Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We know of no other material pending legal proceedings
to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our
subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do
not know of any such proceedings contemplated by any governmental authorities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">We know of no material proceedings in which any of
our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries
or has a material interest adverse to us or any of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_013"></A>ITEM 1A. Risk Factors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_014"></A>ITEM 2. Unregistered Sales of Equity Securities
and Use of Funds</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white">Pursuant to the Agreement
and Plan of Merger with S and S Beverage, Inc., we issued 9,000,000 shares of our common stock to the five legacy S and S shareholders.
The per-share fair market value of the common stock was $0.0301, based on the closing price of the Company&rsquo;s common stock, as reported
by OTC Markets Group Inc. on February 5, 2021, the date on which we filed our Current Report on Form 8-K disclosing the acquisition.
<FONT STYLE="background-color: white">We issued those 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 did not involve any public offering).</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify; background-color: white"><FONT STYLE="background-color: white">&nbsp;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_015"></A>ITEM 3. Defaults Upon Senior Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_016"></A>ITEM 4. Mine Safety Disclosures</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_017"></A>ITEM 5. Other Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><B><A NAME="a_018"></A>ITEM 6. Exhibits</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The following exhibits are filed with or incorporated
by reference into this Quarterly Report.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
<TD STYLE="width: 14%; padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">2.1</FONT></TD>
<TD STYLE="width: 2%; padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="width: 84%; padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000176/e2418_2-1.htm">Agreement and Plan of Merger among Kona Gold Beverage Inc., KGS Temporary Company, Inc., S and S Beverage Inc., William J. Stineman and K&amp;L Beverage, LLC (as the indemnifying S and S shareholders), and William J. Stineman (as representative of the S and S Shareholders), dated January 22, 2021 is incorporated herein by reference to Exhibit 2.1 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 5, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.1</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex3-1.htm">Amended and Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.2</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex3-2.htm">Amended and Restated By-Laws is incorporated herein by reference to Exhibit 3.2 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.3</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex3-3.htm">Certificate of Designation of the Preferences, Rights, and Limitations of the Series B Preferred Stock is incorporated herein by reference to Exhibit 3.3 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.4</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex3-4.htm">Certificate of Designation of the Preferences, Rights, and Limitations of the Series C Preferred Stock is incorporated herein by reference to Exhibit 3.4 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.5</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex3-5.htm">Certificate of Designation of the Preferences, Rights, and Limitations of the Series D Preferred Stock is incorporated herein by reference to Exhibit 3.5 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.6</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001088/e2173_ex3-6.htm">Certificate of Amendment to Amendment and Restated Certificate of Incorporation, is incorporated herein by reference to Exhibit 3.6 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">3.7</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000176/e2418_3-7.htm">Articles of Merger Merging KGS Temporary Company, Inc. with and into S and S Beverage Inc., as filed with the Wisconsin Department of Financial Institutions on February 1, 2021 is incorporated herein by reference to Exhibit 3.7 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 5, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.1</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex4-1.htm">Form of Debenture is incorporated herein by reference to Exhibit 4.1 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.2</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="text-align: justify"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex4-2.htm">Form of Warrant is incorporated herein by reference to Exhibit 4.2 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A> &nbsp; &nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.3s&nbsp;</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001278/e2281_ex4-3.htm">Form of Stand-alone Debenture is incorporated herein by reference to Exhibit 4.3 of the Company&rsquo;s Registration Statement on Form S-1 (File No.333-239883), filed with the SEC on December 14, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.4</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex4-4.htm">Form of Secured Convertible Debenture of the Company sold and issued to YA II PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.4 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.4a*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex4-4a.htm">Certificate of Scrivener&rsquo;s Error in respect of the February 10, 2021 Secured Convertible Debenture, executed as of the 18<SUP>th</SUP> day of February, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.4b*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex4-4b.htm">Certificate of Scrivener&rsquo;s Error in respect of the February 10, 2021 Secured Convertible Debenture, executed as of the 15<SUP>th</SUP> day of March, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.4c*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex4-4c.htm">Form of Secured Convertible Debenture of the Company sold and issued to YA II PN, Ltd., on May 5, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">4.5</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex4-3.htm">Form of Warrant of the Company granted to YA II PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.3 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.1</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-1.htm">Securities Purchase Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.1 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.2</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-2.htm">Registration Rights Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.2 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.3</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-3.htm">Independent Contractor Agreement by and between Kona Gold LLC and OPTN Companies Inc., dated April 15, 2020 is incorporated herein by reference to Exhibit 10.3 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.4</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-4.htm">Board of Directors Offer Letter between the Company and Matthew Crystal, dated July 24, 2018 is incorporated herein by reference to Exhibit 10.4 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.5</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-5.htm">Board of Directors Offer Letter between the Company and William Jeffrey Outlaw, dated September 3, 2019 is incorporated herein by reference to Exhibit 10.5 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt; width: 14%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.6</FONT></TD>
<TD STYLE="padding-right: 0.8pt; width: 2%">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify; width: 84%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-6.htm">Form of Distribution Agreement is incorporated herein by reference to Exhibit 10.6 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.7</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-7.htm">Membership Interest Purchase Agreement by and among Elev8 Hemp LLC, PLAD, Inc., and the Company, dated October 10, 2016, is incorporated herein by reference to Exhibit 10.7 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.8</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-8.htm">Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc. and the Company, dated March 6, 2018, is incorporated herein by reference to Exhibit 10.8 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.9</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-9.htm">Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc. and the Company, dated November 26, 2019 is incorporated herein by reference to Exhibit 10.9 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.10</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-10.htm">Employment Agreement by and between Christopher Selinger and the Company, dated September 1, 2018 is incorporated herein by reference to Exhibit 10.10 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.11</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-11.htm">Lease Agreement by and between Kona Gold, LLC and Hay Investment Properties, Inc., dated June 1, 2018 is incorporated herein by reference to Exhibit 10.11 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.12</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-12.htm">Triple Net Lease Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated May 22, 2019 is incorporated herein by reference to Exhibit 10.12 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.13</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-13.htm">Lease Modification Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated April 21, 2020 is incorporated herein by reference to Exhibit 10.13 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.14</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-14.htm">Line of Credit Agreement by and between Robert Clark and Gold Leaf Distribution, LLC, dated August 29, 2019 is incorporated herein by reference to Exhibit 10.14 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.15</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-15.htm">Line of Credit Agreement by and between Robert Clark and Kona Gold, LLC, dated April 4, 2019 is incorporated herein by reference to Exhibit 10.15 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">10.15a*</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><A HREF="e2773_ex15a.htm">Line of Credit and Security Agreement Modification Agreement #2 to April 4, 2019 Line of Credit Agreement by and between Robert Clark and Kona Gold, LLC, dated April 4, 2021.</A></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.16</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-16.htm">Line of Credit Agreement by and between Matthew Nicoletti and Kona Gold, LLC, dated May 5, 2018 is incorporated herein by reference to Exhibit 10.16 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.17</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-17.htm">Standard Promissory Note issued by Gold Leaf Distribution, LLC in favor of Robert Clark, dated February 19, 2019 is incorporated herein by reference to Exhibit 10.17 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">10.17a*</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><A HREF="e2773_ex17a.htm">Standard Promissory Note Modification Agreement to February 19, 2019 Standard Promissory Note issued by Gold Leaf Distribution, LLC in favor of Robert Clark, dated March 15, 2021.</A></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.18</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-18.htm">Standard Promissory Note issued by Kona Gold, LLC in favor of Robert Clark, dated January 15, 2019 is incorporated herein by reference to Exhibit 10.18 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">10.18a*</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><A HREF="e2773_ex18a.htm">Standard Promissory Note Modification Agreement to January 15, 2019 Standard Promissory Note issued by Kona Gold, LLC in favor of Robert Clark, dated April 4, 2021.</A></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.19</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-19.htm">Employment Agreement by and between the Company and Robert Clark, dated August 12, 2015 is incorporated herein by reference to Exhibit 10.19 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.20</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-20.htm">Employment Agreement by and between the Company and Lori Radcliffe, dated October 8, 2019 is incorporated herein by reference to Exhibit 10.20 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.21</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-21.htm">Amendment to Employment Agreement by and between the Company and Robert Clark, dated December 1, 2016 is incorporated herein by reference to Exhibit 10.21 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.22</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-22.htm">Agreement by and between the Company and Ryan Dodd, dated May 1, 2019 is incorporated herein by reference to Exhibit 10.22 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.23</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-23.htm">Amendment to Employment Agreement by and between Christopher Selinger and Kona Gold Solutions, Inc., dated May 1, 2020 is incorporated herein by reference to Exhibit 10.23of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.24</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-24.htm">Amendment to Employment Agreement by and between Christopher Selinger and the Company, dated January 1, 2019 is incorporated herein by reference to Exhibit 10.24 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.25</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-25.htm">Security Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.25 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
</TABLE>


<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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<P STYLE="margin: 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt; width: 14%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.26</FONT></TD>
<TD STYLE="padding-right: 0.8pt; width: 2%">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify; width: 84%"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-26.htm">Line of Credit and Security Agreement Modification Agreement by and between Kona Gold LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.26 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.27</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220000735/e2010_ex10-27.htm">Line of Credit and Security Agreement Modification Agreement by and between Gold Leaf Distribution LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.27 of the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.28</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001088/e2173_ex10-28.htm">Terms of Oral Agreement between the Company and Robert Clark is incorporated herein by reference to Exhibit 10.28 of Amendment No. 1 to the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.29</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001088/e2173_ex10-29.htm">Waiver Agreement by and between the Company and YA II PN, Ltd., dated October 14, 2020, is incorporated herein by reference to Exhibit 10.29 of Amendment No. 1 to the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.30</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001088/e2173_ex10-30.htm">Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.30 of Amendment No. 1 to the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.31</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001088/e2173_ex10-31.htm">Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.31 of Amendment No. 1 to the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.32</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112220001278/e2281_ex10-32.htm">Securities Purchase Agreement by and between the Company and YA II PN, Ltd., dated November 30, 2020, is incorporated herein by reference to Exhibit 10.32 to the Company&rsquo;s Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on December 14, 2020.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.33</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex10-28.htm">Form of Securities Purchase Agreement between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.28 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.33a*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex10-34a.htm">Form of Limited Amendment Agreement to Securities Purchase Agreement between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021, dated as of May 5, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.34</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex10-29.htm">Form of Registration Rights Agreement by and between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.29 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.35</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex10-30.htm">Form of Amended and Restated Security Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.30 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.36</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex10-31.htm">Form of Intellectual Property Security Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.31 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">10.37</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="http://www.sec.gov/Archives/edgar/data/1802546/000173112221000281/e2469_ex10-32.htm">Form of Amended and Restated Global Guaranty Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.32 of the Company&rsquo;s Current Report on Form 8-K, filed with the SEC on February 18, 2021.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">31.1*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex31-1.htm">Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">31.2*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex31-2.htm">Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Securities Act of 1934.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">32.1*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex32-1.htm">Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.</A></FONT></TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
<TD STYLE="padding-right: 0.8pt"><FONT STYLE="font: 10pt Times New Roman, Times, Serif">32.2*</FONT></TD>
<TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
<TD STYLE="padding-right: 0.8pt; text-align: justify"><FONT STYLE="font: 10pt Times New Roman, Times, Serif"><A HREF="e2773_ex32-2.htm">Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.</A></FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

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  <TR STYLE="vertical-align: top">
    <TD STYLE="width: 14%; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.INS*</FONT></TD>
    <TD STYLE="width: 2%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 84%; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Instance Document</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.SCH*</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Taxonomy Extension Schema Document</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.CAL*</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Taxonomy Extension Calculation Linkbase Document</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.DEF*</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Taxonomy Extension Definition Linkbase Document</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.LAB*</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Taxonomy Extension Label Linkbase Document</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Ex. 101.PRE*</FONT></TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">XBRL Taxonomy Extension Presentation Linkbase Document</FONT></TD></TR>
  </TABLE>


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    <TD STYLE="width: 96%; padding-right: 0.8pt; text-align: justify"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Filed herewith</FONT></TD></TR>
  </TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><B><A NAME="a_019"></A>SIGNATURES</B></P>




<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">&nbsp;</P>

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    <TD STYLE="width: 55%; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 45%; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kona Gold
    Beverage, Inc.</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dated:&#9;May 17, 2021</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/
    Robert Clark</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">President and Chief Executive
    Officer</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Principal Executive Officer)</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Dated:&#9;May 17, 2021</FONT></TD>
    <TD STYLE="border-bottom: black 1pt solid; padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">/s/
    Lori Radcliffe</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chief Financial Officer</FONT></TD></TR>
  <TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-right: 0.8pt"><FONT STYLE="font-family: Times New Roman, Times, Serif; font-size: 10pt">(Principal Financial Officer)</FONT></TD></TR>
  </TABLE>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0; text-align: center">82</P>

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{"company-data": {"conformed-name": "KONA GOLD BEVERAGE, INC.", "cik": "0001802546", "assigned-sic": "2080", "irs-number": "815175120", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-56230", "film-number": "21932696"}, "business-address": {"street1": "746 NORTH DRIVE", "street2": "SUITE A", "city": "MELBOURNE", "state": "FL", "zip": "32934", "phone": "8447142224"}, "mail-address": {"street1": "746 NORTH DRIVE", "street2": "SUITE A", "city": "MELBOURNE", "state": "FL", "zip": "32934"}, "former-company": [{"former-conformed-name": "KONA GOLD SOLUTIONS, INC.", "date-changed": "20200714"}, {"former-conformed-name": "Kona Gold Solutions", "date-changed": "20200206"}]}
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark One)
☒
QUARTERLY
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2021
☐
TRANSITION
    REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from _____________ to _______________
Commission
File Number 000-56230
Kona
Gold Beverage, Inc.
(Exact
name of registrant as specified in its charter)
Delaware
81-5175120
(State
or other jurisdiction of incorporation or organization)
(IRS Employer
Identification No.)
746
North Drive, Suite A
Melbourne, Florida
32934
(Address
of principal executive offices)
(Zip
Code)
(
844)
714-2224
(Registrant's
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
    of each class
Trading
    Symbol(s)
Name
    of each exchange on which registered
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large
    accelerated filer
☐
Accelerated
    filer
☐
Non-accelerated
    filer
☐
Smaller
    reporting company
☒
Emerging
    growth company
☒
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The
number of shares of the issuer's common stock, par value $0.0001 per share, outstanding as of May 17, 2021 was
840,163,265
.
INDEX TO FORM 10-Q FILING
FOR THE QUARTER ENDED MARCH 31, 2021
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
Item 1.
Financial Statements
ii
Kona Gold Beverage, Inc.
Unaudited Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020
F-1
Unaudited Consolidated Statements of Income (Unaudited) for the Three Months Ended March 31, 2021 and 2020
F-2
Unaudited Consolidated Statements of Cash Flows (Unaudited) for the Three Months Ended March 31, 2021 and 2020
F-3
Unaudited Consolidated Statements of Stockholders' Equity (Unaudited) for the Three Months Ended March 31, 2021 and 2020
F-4
Notes to the Unaudited Consolidated Financial Statements (Unaudited)
F-5
S and S Beverage, Inc.
Unaudited Balance Sheet as of January 31, 2021 and audited balance sheet as of December 31, 2020
F-41
Unaudited Statements of Loss for the one month ended January 31, 2021 and 2020
F-42
Unaudited Statements of Stockholders' Deficit for the one month ended January 31, 2021 and 2020
F-43
Unaudited Statements of Cash Flows for the one month ended January 31, 2021 and 2020
F-44
Notes to the Consolidated Financial Statements
F-45
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
54
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
77
Item 4.
Controls and Procedures
77
PART II
OTHER INFORMATION
78
Item 1.
Legal Proceedings
78
Item 1A.
Risk Factors
78
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
78
Item 3.
Defaults upon Senior Securities
78
Item 4.
Mine Safety Disclosures
78
Item 5.
Other Information
78
Item 6.
Exhibits
79
SIGNATURES
82
i
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Financial Statements of Kona Gold Beverage, Inc. (formerly known as Kona Gold Solutions, Inc.)
Unaudited Consolidated Balance Sheet as of March 31, 2021 and audited Balance sheet as of December 31, 2020
F-1
Unaudited Consolidated Statements of Loss for the three months ended March 31, 2021 and 2020
F-2
Unaudited Consolidated Statements of Stockholders' Deficit for the three months ended March 31, 2021 and 2020
F-3
Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020
F-4
Notes to the Unaudited Consolidated Financial Statements
F-5
ii
Balance Sheet
Unaudited
Audited
Three Months Ended
Year Ended
March 31,
December 31,
ASSETS
2021
2020
CURRENT ASSETS
Cash and cash equivalents
$
56,201
$
113,168
Accounts
    receivable, net of allowance for doubtful accounts of $3,967 and $5,019, respectively
111,676
—
Other receivables
14,876
14,876
Inventory
861,652
660,504
Other current assets
7,518
5,572
Total current assets
1,051,923
794,120
NON-CURRENT ASSETS
Property, plant and equipment, net
178,230
167,872
Right-of-use asset, net
875,970
912,993
Intangible property, net
79,441
69,488
Goodwill
1,275,938
—
Note receivable, net of allowance $1,500,000 and $0, respectively
—
—
Deposit
6,500
6,500
Total non-current assets
2,416,079
1,156,853
Total assets
$
3,468,002
$
1,950,973
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable
$
257,846
$
208,599
Amounts owed to customers
—
10,508
Credit card payables
6,544
19,469
Current note payable - related party
9,000
12,000
Current lease liability
112,383
149,407
Convertible debt
1,200,000
900,000.00
Derivative liability
627,018
361,152.00
Accrued compensation
318,958
257,500.00
Accrued stock compensation
1,386,497
1,386,497
Accrued liabilities
105,033
81,624
Total current liabilities
4,023,279
3,386,756
NON-CURRENT LIABILITIES
Line of credit
398,470
398,470
Line of credit - related party
1,498,151
1,495,151
Note payable - related party, net of current
56,000
56,000
Note payable
642,282
—
PPP note payable
212,648
95,161
Lease liability, net of current
763,587
763,586
Total liabilities
7,594,417
6,195,124
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS' DEFICIT
Preferred Stock Series A, $.00001 par value, 0 shares authorized, 0 issued, and outstanding, respectively
—
—
Preferred Stock Series B, $.00001 par value, 1,200,000 shares authorized, 488,000 issued and outstanding, respectively
5
5
Preferred Stock Series C, $.00001 par value, 250, 3,300,000 and 3,300,00 shares authorized, 140 and 0 issued, and outstanding, respectively
—
—
Preferred Stock Series D, $.00001 par value, 500,000 shares authorized, 500,000 issued, and outstanding, respectively
5
5
Common Stock, $.00001 par value, 2,500,000,000 authorized, 825,726,839 and 786,308,041, issued and outstanding, respectively
8,257
7,863
Additional paid-in capital - warrants
1,334,136
281,565
Additional paid-in capital
5,630,762
4,746,447
Accumulated deficit
(11,099,579
)
(9,280,036
)
Total stockholders' deficit
(4,126,415
)
(4,244,151
)
Total liabilities and stockholders' deficit
$
3,468,002
$
1,950,973
See notes to financial statements
F-
1
Kona Gold Beverage, Inc. and Subsidiaries
Unaudited
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED
March 31,
2021
2020
REVENUES, NET OF SALES, RETURNS, AND ALLOWANCES OF $28,707 AND $51,159, RESPECTIVELY
$
462,408
$
202,057
COST OF REVENUES
313,920
145,967
Gross profit
148,488
56,090
OPERATING EXPENSES
Selling, general and administrative expenses
568,980
647,219
Income (Loss) from operations
(420,492
)
(591,129
)
Other income / (expense)
Interest expense
(17,373
)
(3,807
)
Interest expense related to loan origination fee on convertible note
(41,000
)
—
Interest expense related to warrants on convertible note
(1,052,571
)
—
Interest expense on convertible note
(19,966
)
Loss on derivative
(265,866
)
—
Tax expense
(2,275
)
Net Income (Loss)
$
(1,819,543
)
$
(594,936
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic and diluted
775,469,306
710,868,609
NET LOSS PER COMMON SHARES:
Basic and diluted
$
(0.00
)
$
(0.00
)
See
notes to financial statements
F-
2
Statements of Stockholders'
Deficit
Common Stock
Preferred Stock
Additional
Total
$.00001 Par
$.00001 Par
Paid
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
in Capital
Deficit
Deficit
Balance December 31, 2019
763,967,603
$
7,640
4,988,000
$
50
$
4,155,777
$
(6,154,441
)
$
(1,990,976
)
Common Stock Issued for Compensation
5,000,000
50
318,450
318,500
Net Income (loss)
(594,936
)
(594,936
)
Balance March 31, 2020
768,967,603
$
7,690
4,988,000
$
50
4,474,227
$
(6,749,377
)
$
(2,267,412
)
Common Stock Issued for Sponsorship Agreements
85,000
1
2,577
2,578
Common Stock Issued for Compensation
5,000,000
50
157,450
157,500
Warrants related to convertible note
281,565
281,565
Net Income (loss)
(1,066,920
)
(1,066,920
)
Balance June 30, 2020
774,052,603
$
7,741
4,988,000
$
50
$
4,915,819
$
(7,816,297
)
$
(2,892,689
)
Common Stock Conversion to Preferred Stock
(140
)
(0
)
140
0.00
—
Preferred Stock Conversion to Common Stock
4,000,000
40
(4,000,000
)
(40.00
)
—
—
Accrued Common Stock Issues for Compensation
140
0
2
2
Net Income (loss)
(509,441
)
(509,441
)
Balance September 30, 2020
778,052,603
$
7,781
988,140
$
10
$
4,915,821
$
(8,325,738
)
$
(3,402,128
)
Common Stock Issued for Conversion of Convertible Debt
8,255,438
83
112,191
112,274
Net Income (loss)
(954,298
)
(954,298
)
Balance December 31, 2020
786,308,041
$
7,863
988,140
$
10
$
5,028,012
$
(9,280,036
)
$
(4,244,153
)
Common Stock Issued for Conversion of Convertible Debt
30,418,798
304
613,505
613,809
Common Stock Issued for Acquisition
9,000,000
90
270,810
270,900
Warrants related to convertible note
1,052,571
1,052,571
Net Income (loss)
$
(1,819,543
)
$
(1,819,543
)
Balance March 31, 2021
825,726,839
$
8,257
988,140
$
10
$
6,964,898
$
(11,099,579
)
$
(4,126,416
)
See
notes to financial statements
F-
3
Kona Gold Beverage, Inc. and Subsidiaries
Unaudited
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31,
2021
2020
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss
$
(1,819,543
)
$
(594,936
)
Adjustments to reconcile net income to net cash  provided by operations:
Depreciation and Amortization
9,907
4,981
Common Stock Issued in Exchange for Services
—
—
Common Stock Issued in Acquisition
270,900
—
Common Stock Issued for Sponsorship
—
—
Common Stock Issued for Compensation
318,500
Preferred Stock Issued for Compensation
—
—
Interest expense related to warrants on convertible debt
1,052,571
—
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
(122,184
)
8,015
Decrease (increase) in other receivable
—
—
Decrease (increase) in inventory
(201,148
)
(96,608
)
Decrease (increase) in prepaids
—
—
Decrease (increase) in other current assets
(1,946
)
(1,723
)
Decrease (increase) in deposits
—
—
Decrease (increase) in right-of-use asset
37,023
17,157
Increase (decrease) in accounts payable
49,246
90,270
Increase (decrease) in credit card payable
(12,925
)
7,317
Increase (decrease) in accrued compensation
61,458
—
Increase (decrease) in accrued stock compensation
—
—
Increase (decrease) in accrued expenses
23,409
3,587
Increase (decrease) in derivative liability
265,866
—
Increase (decrease) in lease liability
(37,023
)
(16,537
)
Net cash provided by (used in) operating activities
(424,389
)
(259,977
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment
(20,265
)
(16,881
)
Changes in goodwill
(1,275,938
)
—
Changes in intellectual property
(9,953
)
2,044
Net cash provided by (used in) investing activities
(1,306,156
)
(14,837
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Proceeds from shareholder payable
—
—
Changes in note payable - related party
(3,000
)
260,120
Changes in line of credit - related party
—
(3,000
)
Changes in note payable - acquisition
642,282
Changes line of credit
—
—
Changes in convertible debt
913,809
—
Changes in PPP note payable
117,487
—
Net cash provided by (used in) financing activities
1,670,578
257,120
Net cash increase for period
(59,967
)
(17,694
)
Cash at beginning of period
113,168
36,223
Cash at end of period
$
53,201
$
18,529
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes
$
—
$
—
Cash paid for interest
$
17,205
$
35,877
See notes to financial statements
F-
4
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Kona Gold Beverage, Inc., a Delaware corporation
("Kona Gold," the "Company," "we," "us," or "our"), owns and operates a line
of premier CBD lifestyle brand products. As of March 31, 2021 the Company has four wholly-owned subsidiaries: Kona Gold LLC, a Delaware
limited liability company ("Kona"), HighDrate LLC, a Florida limited liability company ("HighDrate"), Gold Leaf
Distribution LLC, a Florida limited liability company ("Gold Leaf"), and in February 2021, the Company acquired all of the
capital stock of S and S Beverage, Inc. ("S and S"), a Wisconsin corporation. The Company is primarily focused on product
development in the functional beverage sector. Kona Gold creates hemp-infused energy drinks, which includes hemp energy drinks, CBD energy
water, and also sells Kona Gold merchandise and apparel, which promotes the Company's beverages. HighDrate focuses on the development
and marketing of CBD-infused energy waters geared towards the fitness and wellness markets. S and S focuses on the development and marketing
of lemon-flavored beverages under the name OOH LA Lemin. Gold Leaf focuses on the distribution of premium beverages and snacks in key
markets.
The Company currently sells its products
through resellers, the Company's websites, and distributors that span across 27 states. The Company's products are available
in wide variety of stores, including convenience and grocery stores, smoke shops, and gift shops.
As used herein, the terms "Kona Gold,"
the "Company," "we," "us," or "our, refer to Kona Gold individually or, as the context requires,
collectively with its subsidiaries on a consolidated basis.
The Company's Business
The Company has two reportable segments:
●
Beverages.
Includes three types of beverage products: (i) hemp-infused energy drinks, (ii) CBD-infused energy water, (iii) CBD-infused high-alkaline water, and (iv) lemon flavored beverages, as well as apparel with the Kona Gold logo. The Beverages Segment includes all of Kona's, HighDrate's, and S and S's operations. Additional information regarding these products is below. The Company considers this a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying Consolidated Financial Statements present financial information in a format that is consistent with the internal financial information used by management. The Company does not accumulate revenues by product classification and, therefore, it is impractical to present such information.
●
Distribution.
Includes the distribution of premium beverages and snacks in key markets. These markets include over 600 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. In addition to distributing the Company's own beverage products, the Company also distributes other products, including alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low-carb lemonade, healthy aloe juice drinks, and CBD-infused jellybeans, all of which complement the Company's current product offerings. The Distribution Segment includes all of Gold Leaf's operations.
Beverage Products
The Company's 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.
F-
5
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
HighDrate's CBD-infused energy water
is great tasting, sugar-free, and powered by the patented technology of Alkame Holdings Inc.'s wholly-owned subsidiary, Alkame Water
Inc. ("Alkame"), 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 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 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. The Company believes 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.
The Company's 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.
OOH LA Lemin is lemonade for the modern age.
It is made natural and refreshing with no added sugar and is low in carbs and only 15 calories. OOH LA Lemin is available in four distinct
flavors: original lemonade, peach lemonade, strawberry lemonade, and blue raspberry lemonade.
The Company also sells branded apparel. The
Company uses only high-quality textiles and specialty inks and foils, which provide consumers with a premium fit and feel. The Company
currently offers shirts, tanks, hats, and towels for sale.
Effects of COVID-19
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 the Company's consumer demand, sales, and financial performance will
depend on certain developments, including, among other things, the duration and spread of the outbreak and the impact on the Company's
consumers and employees, all of which are uncertain and cannot be predicted. Management is actively monitoring this situation and potential
impacts on our financial condition, liquidity, and results of operations.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.
Basis of Presentation
The accompanying consolidated financial statements
are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting
and in accordance with generally accepted accounting principles ("GAAP") in the United States.
B.
Use of Estimates
The preparation of the consolidated financial
statements in conformity with GAAP 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.
F-
6
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
C.
Cash and Cash Equivalents
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.
D.
Fair Value of Financial Instruments
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 can 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.
The Company analyzes all financial instruments
with features of both liabilities and equity under Accounting Standards Codification ("ASC") 480,
Distinguishing Liabilities
from Equity,
and ASC 815,
Derivatives and Hedging
("ASC 815"). Derivative liabilities are adjusted to reflect fair
value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair
value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall
fair value of the financial instruments. In addition, the fair value of free-standing derivative instruments such as warrant and option
derivatives are valued using the Black-Scholes models.
The Company uses Level 2 inputs for its valuation
methodology for the embedded conversion option liabilities as their fair value were determined by using the Black-Scholes option-pricing
model based on various assumptions. The Company's derivative liabilities are adjusted to reflect fair value at each period end,
with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
E.
Accounts Receivable and Allowance for Doubtful Accounts
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. If the Company becomes 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. There was no bad debt attributed to accounts receivable in the year ended March 31, 2021 and 2020,
respectively. These amounts are included in selling, general and administrative expenses in the accompanying Consolidated Statements of
Loss. Management will review annually to determine provisions and record an allowance as deemed necessary. In the opinion of management,
a provision was deemed necessary for uncollectible accounts for Kona and no provision was deemed necessary for Gold Leaf. The balance
of allowance for Uncollectible Accounts at March 31, 2021 and December 31, 2020 were $3,967, respectively, as reflected in the accompanying
Consolidated Balance Sheets.
F-
7
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
F.
Inventories
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 inventory consists almost entirely of finished and unfinished goods, and freight, which
include CBD energy waters, CBD waters, hemp energy drinks, cans for production, and merchandise and apparel. The Company periodically
evaluates and adjusts 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 at December 31, 2020 and 2019, all inventory was current, as reflected in the accompanying
Consolidated Balance Sheets.
G.
Property, Plant and Equipment
Property, plant and equipment are reported
on the accompanying Consolidated 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:
Estimated useful lives (in years)
Furniture and fixtures
7
Machinery and equipment
7
Vehicles
5
Computer equipment
5 – 7
H.
Goodwill and Intangible Assets
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
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 exist 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 determined that, for the year
ending December 31, 2020, there were no identifiable assets or liabilities; therefore, the implied fair value of goodwill is zero. On
January 21, 2021, the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired
all of the capital stock of S and S Beverage Inc. ("S and S"). Because of this, goodwill was recorded in the amount of $1,275,938
see Note 4,
Goodwill and Intangible Assets
. Management determined that there was no impairment of trademarks for the year ending
December 31, 2020. See Note 4,
Goodwill and Intangible Assets
.
F-
8
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
I.
Leases
On January 1, 2019, the Company adopted the
Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") 2016-02,
Leases (Topic
842)
("ASC Topic 842"), which requires an entity to recognize a liability and corresponding asset for leases that meet
certain criteria. The Company applied ASC Topic 842 using the modified retrospective approach. Under this approach, the Company applied
the new standards to all new leases, and leases which have remaining obligations for financial statements issued for fiscal years beginning
after December 15, 2018. The Company elected the package of practical expedients permitted under the transition guidance, which allowed
the Company to carryforward historical lease classification, and not reassess (i) whether a contract was or contained a lease, and (ii)
initial direct costs for any leases that existed prior to January 1, 2019. Under this method, the Company did not restate comparative
periods in its financial statements. 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 Consolidated
Balance Sheet.
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.
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. The Company has elected to use the risk-free rate.
J.
Revenue and Provision for Sales, Returns, and Allowances
The Company sells
its products, which primarily includes its hemp energy drinks, CBD energy waters, CBD waters, and logo apparel, to online customers or
through resellers and distributors. In evaluating the timing of the transfer of control of products to customers, the Company considers
several indicators, including significant risks and rewards of products, the Company's 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.
The Company also sells its products, and
beverages purchased for resale from several other beverage manufacturers, to convenience stores, grocery stores, and smoke and gift shops.
In evaluating the timing of the transfer of control of products to customers, the Company considers several indicators, including significant
risks and rewards of products, the Company's 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.
F-
9
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
On January 1, 2019, the Company adopted ASU
No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
("ASC Topic 606"). The underlying principle of ASC Topic
606 is to recognize revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation
of Topic ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.
To apply these principles, ASC Topic 606
outlines a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:
1.
Identifying the contract(s) or agreement(s) with a customer;
2.
Identifying the separate performance obligations in the contract or agreement;
3.
Determining the transaction price;
4.
Allocating the transaction price to the separate performance obligations in the contract or agreement; and
5.
Recognizing revenue as each performance obligation is satisfied.
Pursuant to ASC Topic 606, the Company recognizes
revenue when performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control,
including the risks and rewards of ownership. With respect to the Company, performance is deemed to occur upon shipment or delivery of
products to its customers based on the written contract terms, which is also when control is transferred.
The Company evaluated
the guidance in ASC 606-10-50-5 and the related implementation guidance to determine disaggregation of revenues that would be meaningful.
The majority of the Company's revenue earned from its Beverages Segment and its Distribution Segment is recognized when it satisfies
a single performance obligation by transferring control of its products to a customer. The Company does not have significant financing
component or payment terms, and it does not have any material unsatisfied performance obligations. The Company's revenues are obtained
in similar geographical locations within the United States. Furthermore, the Company's operations in each of its reporting segments
are expected to have essentially the same future prospects, similar gross margins, sales trends, and the nature of its products and customers
are essentially the same. The sales from the Company's beverage product types are organized as one reportable segment, which the
Company refers to as the Beverages Segment, and the sales of the Company's products and products that are purchased from resellers
that are distributed by Gold Leaf is organized as its second reportable segment, which the Company refers to as the Distribution Segment.
The Company has also determined that disaggregated revenue by net sales by revenue source would be meaningful and allow investors to understand
its business activities, historical performance, or future prospects. Disaggregated sales by revenue source, which includes sales to distributors,
online sales, sales through Amazon, and Gold Leaf distribution sales, is included in Note 16,
Revenue
, to the Consolidated Financial
Statements. We also sell merchandise and apparel that comprises approximately 1% of the Company's gross annual sales, and solely
exists to promote its beverages. Therefore, the Company's merchandise and apparel products are not a reportable segment. Merchandise
and apparel sales are included with the gross sales for its Beverages Segment.
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 return, and allowance at the three months ending March 31, 2021 and 2020 of approximately $15,034 and $44,965, respectively, which
is included in the revenues, net of sales returns and allowances in the accompanying Consolidated Statements of Loss.
F-
10
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
K.
Cost of Revenues
Cost of revenues consist primarily of expenses
associated with the delivery and distribution of products. 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 revenues. The costs are charged to cost of revenues in the same period that the associated revenue is earned.
L.
Impairment of Long-Lived Assets
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, 2020 and determined long-lived assets were not impaired.
M.
Income Taxes
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 of the accompanying Consolidated Balance Sheets dated March 31, 2021 and December 31, 2020, respectively.
N.
Stock-Based Compensation
FASB's ASC Topic 718,
Stock Compensation
(formerly, FASB Statement 123R) ("ASC Topic 718"), 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 common stock, par value $0.00001 per share (the "Common Stock"),
on the date of grant.
The Company estimates the fair value of each
restricted stock award as of the date of grant using the closing price as reported by the OTC Markets Group Inc. (the "OTCM")
on the date of grant. The fair value determined represents the cost for the award and is recognized over the vesting period during which
an employee is required to provide service in exchange for the award. The Company accounts for forfeitures of restricted stock as they
occur.
F-
11
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
O.
Advertising Costs
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, 2021 and 2020, were approximately $10,300 and $12,300,
respectively, which amounts were included in selling, general and administrative expenses in the accompanying Consolidated Statements
of Loss.
P.
Concentration of Credit Risk
The Company maintains 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.
Q.
Basic and Diluted Earnings per Share
In accordance with FASB's 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.
R.
Segments
ASC 280-10,
Segment Reporting
("ASC
280-10"), establishes standards for reporting information regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes
standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of
an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or
decision-making group, in making decisions how to allocate resources and assess performance. The Company identified two operating segments
that report revenue, including both sales to external customers and intersegment sales or transfers, that are 10% or more of the combined
revenue, internal and external, of all the Company's operating segments. Furthermore, each of the operating segments have assets
that are 10% or more of the combined assets of all operating segments.
The Company then applied the management approach
to the identification of its two reportable segments – the Beverages Segment, consisting of the operations of Kona, HighDrate, and
S and S, and the Distribution Segment, consisting of the operations of Gold Leaf. Specifically, the Company has evaluated guidance in
ASC 280-10 and determined that aggregation is consistent with the objectives of ASC 280-10 in that aggregation into two reportable segments
allows users of our financial statements to view the Company's business through the eyes of management based upon the way management
reviews performance and makes decisions. Additional factors that were considered included: whether or not an operating segment has similar
economic characteristics, the nature of the products/services under each operating segment, the nature of the production/go-to-market
process, the type and geographic location of our customers, and the distribution of our products/services. The Company further determined
that its logo merchandise and apparel, which revenue comprises approximately 1% of the Company's gross annual sales, and solely
exists for promotion purposes, could be aggregated with the operations in the Beverages Segment. A description of the Company's
products is contained in Note 1,
Organization and Description of Business.
For additional information regarding the Company's
two reportable segments, please see Note 17,
Segments.
F-
12
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
S.
Registration Rights Agreement
In May 2020, the Company completed a private
placement transaction (the "2020 Private Placement") of three secured convertible debentures (the "2020 Debentures"),
convertible for up to 105,947,397 shares (the "2020 Conversion Shares") of Common Stock and a Warrant to purchase Common Stock
(the "2020 Warrant"), exercisable for up to 20,000,000 shares of Common Stock (the "2020 Warrant Shares"), pursuant
to that certain Securities Purchase Agreement between an otherwise unaffiliated third-party investor (the "Selling Stockholder")
and the Company, dated as of May 14, 2020 (the "2020 SPA"). The Company sold and issued the initial 2020 Debenture (the "First
2020 Debenture") and granted the Warrant promptly after entering in the 2020 SPA. The Company sold and issued the second 2020 Debenture
(the "Second 2020 Debenture") promptly after filing the registration statement on Form S-1 (the "2020 Registration Statement")
with the Securities and Exchange Commission (the "SEC"). The Company sold and issued the third 2020 Debenture (the "Third
2020 Debenture") promptly after the SEC declared the Registration Statement effective. The Company agreed to register the 2020 Conversion
Shares and 2020 Warrant Shares pursuant to the terms of the Registration Rights Agreement between the Selling Stockholder and Company,
dated as of May 14, 2020 (the "2020 Registration Rights Agreement").
Pursuant to the terms of the Registration
Rights Agreement, the Company agreed to file the 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. Further, the Company agreed to use its best
efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the effectiveness
deadline, or by the 5
th
trading day following the date on which the Company is notified that the Registration Statement will
not be reviewed or is no longer subject to further review and Pursuant to the terms of the 2020 Registration Rights Agreement, the Company
agreed to file the 2020 Registration Statement with the SEC registering for resale the 2020 Conversion Shares and the 2020 Warrant Shares
within 45 calendar days following the closing of the 2020 Private Placement. Further, the Company agreed to use its best efforts to have
the 2020 Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline,
or by the 5
th
trading day following the date on which the Company is notified that the 2020 Registration Statement will not
be reviewed or is no longer subject to further review and comments. Pursuant to the 2020 Registration Rights Agreement, the Company is
subject to partial liquidated damages equal to 2.0% of the aggregate purchase price paid by the holder pursuant to the 2020 SPA for any
of the 2020 Debentures then held by the holder for failure to file the 2020 Registration Statement timely, failure to file with the SEC
a request for acceleration in accordance with Rule 461 promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), within five trading days after the date the Company is notified that the 2020 Registration Statement will not be reviewed
or is not subject to further review, the 2020 Registration Statement is not declared effective by the effectiveness deadline, if after
effectiveness, the 2020 Registration Statement ceases for any reason to remain continuously effective as required or if the holders are
not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an aggregate of 40 calendar
days during any 12-month period, or if after the six-month anniversary of the 2020 Registration Rights Agreement, the Company does not
have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum aggregate liquidated
damages payable to a holder of the 2020 Debentures under the 2020 Registration Rights Agreement is 24% of the aggregate purchase price
paid by such holder pursuant to the 2020 SPA. The Selling Stockholder has agreed to waive this 30-consecutive-calendar-day provision for
so long as the Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and
promptly thereafter files a Post-Effective Amendment to the 2020 Registration Statement, both of which the Company accomplished.
F-
13
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The Company accounts for registration rights
agreements in accordance with ASC subtopic 825-20,
Registration Payment Arrangements
("ASC 825-20"). Under ASC 825-20,
the Company is required to disclose the nature and terms of the arrangement, the maximum potential amount and to assess each reporting
period the probable liability under these arrangements and, if exists, to record or adjust the liability to current period operations.
ASC 825-20 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision of a financial instrument, should be separately recognized
and accounted for as a contingency in accordance with ASC 450-20,
Loss Contingencies
. The Company recorded no amount for this contingency
in other expenses for the year ended December 31, 2020. As a result, there was no contingency recorded as a liability as a component of
accrued expenses as of December 31, 2020.
In February 2021, the Company completed an
additional private placement transaction (the "2021 Private Placement") of two secured convertible debentures (the "2021
Debentures"), convertible for up to 154,958,678 shares (the "2021 Conversion Shares") of Common Stock and granted a
Warrant to purchase Common Stock (the "2021 Warrant"), exercisable for up to 50,000,000 shares of Common Stock (the "2021
Warrant Shares"), pursuant to that certain Securities Purchase Agreement between the Selling stockholder and the Company, dated
as of February 10, 2021 (the "2021 SPA"). The Company sold and issued the initial 2021 Debenture (the "First 2021 Debenture")
and granted the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second 2021 Debenture (the "Second
2021 Debenture") promptly after the SEC declares effective the 2021 Registration Statement (as defined below).
The 2021 Debentures are due 12 months from
their respective issuance dates and are secured by all of the Company's assets and the assets of each of its subsidiaries pursuant
to that certain Security Agreement by and among the Selling Stockholder, the Company's subsidiaries, and the Company. Initially,
the 2021 Debentures are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the
"2021 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, subject to adjustment (the "2021 Market Conversion
Price"). The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if
the Company issues shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the
2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and
similar events will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a
"conversion blocker" such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result
in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following
such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures
or exercise of the 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that
4.99% "conversion blocker" to 9.99% upon at least 65 days' prior written notice to the Company. The 2021 Debentures
accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder
converts the 2021 Debentures or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable
either in cash or, if certain Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock
at the 2021 Market Conversion Price on the trading day immediately prior to the date paid.
At the Company's option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity
dates; provided, that, as of the date of the holder's receipt of the redemption notice, (i) the VWAP of the Common Stock is less
than the 2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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"). The Company must provide the holder
15 business days' advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.
F-
14
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The 2021 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock
equivalents at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.
Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the "original issue discount"
of $36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an "original issue discount."
In connection with the 2021 Private Placement,
the Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has
a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails
to maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default
(as defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a "cashless" basis. "Event
of Default" means an event of default under the 2021 SPA or the 2021 Debentures.
The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.
The 2021 Warrant is subject to an "exercise
blocker" such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% "exercise blocker"
to 9.99% upon at least 65 days' prior written notice to the Company.
Pursuant to the terms of the 2021 Registration
Rights Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the "2021 Registration
Statement") with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.
F-
15
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
T.
Recently Issued Accounting Pronouncements
The Company has evaluated all recently issued
accounting pronouncements, issued or proposed, by the FASB or other standards-setting bodies as of the period ending March 31, 2021. The
Company does not expect a material impact on the Company's financial position, result of operations, or cash flows from these pronouncements.
NOTE 2 – INVENTORY
Inventory consisted of the following:
March
    31, 2021
December
    31, 2020
CBD
    Energy Water
$
147,199
$
159,813
Hemp
    Energy Drink
303,918
343,119
Storm
    CBD Water
29,938
28,692
Ooh
    La Lemin Drink
165,966
—
Merchandise
    and Apparel
12,149
11,948
Unfilled
    Cans, Trays and Sleeves
108,788
38,705
Miscellaneous
    Beverages
32,177
33,225
Other
    Inventory
59,877
43,362
Point
    of Sale Inventory
1,640
1,640
Total
    Inventory
$
861,652
$
660,504
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
March 31, 2021
December 31, 2020
Furniture and Fixtures
$
66,154
$
57,879
Computers and Software
18,855
16,638
Machinery & Equipment
88,456
79,951
Vehicles
68,135
68,135
Less: Accumulated Depreciation
(64,638
)
(54,731
)
Property, plant and equipment, net
$
176,962
$
167,872
Depreciation for the three months ended March
31, 2021 and 2020, was approximately $9,907 and $7,673 respectively, and is included in selling, general and administrative expenses in
the accompanying Consolidated Statements of Loss.
F-
16
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE
4 – GOODWILL AND INTANGIBLE ASSETS
In April 2019, Gold Leaf acquired 21,000,000
shares, representing all of the issued and outstanding shares of common stock, $0.01 par value per share, of BigSupersearch.com, Inc.,
a California corporation ("BigSupersearch"), and 14,000,000 shares of its Series A preferred stock, for $61,000, which amount
included the purchase price, attorney fees, and transfer fees. At the time of the acquisition, BigSupersearch was considered a "shell
company" because it had no operations and no assets. Because no transfer of assets or liabilities occurred, the entire $61,000,
representing the consideration paid for all of the issued and outstanding capital stock of BigSupersearch, was recorded as goodwill. Gold
Leaf has not commenced operations or done anything with BigSupersearch and it still remains a shell company.
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 Company uses a 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, BigSupersearch 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 BigSupersearch exceeded its carrying value, including goodwill. In accordance with the Qualitative Assessment outlined in ASC
350-20-35,
Goodwill – Subsequent Measurement
("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 than zero and its fair value exceeds its carrying amount, then
there is no impairment and the second step is not necessary. If the carrying amount of BigSupersearch exceeds the fair value, then goodwill
will be measured for impairment in the second step. The amount of impairment loss recorded is the difference in the excess of the carrying
amount over its fair value.
Management determined that for the year ending
December 31, 2019, BigSupersearch had 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, 2020, the Company had $0 in goodwill.
On January 21, 2021,
the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired all of the capital
stock of S and S Beverage Inc. ("S and S"). To consummate the Acquisition, a Certificate of Merger with the Wisconsin Department
of Financial Institutions (the "Merger Certificate") on February 1, 2021. On January 22, 2021, (i) Kona Gold, (ii) KGS Temporary
Company, Inc. (the "Acquisition Subsidiary"), (iii) S and S, (iv) William J. Stineman and K&L Beverage, LLC, a Wisconsin
limited liability company (as the indemnifying S and S shareholders), and (v) Mr. Stineman (as representative of the S and S Shareholders)
entered into the Agreement and Plan of Merger (the "Merger Agreement"). S and S merged with and into our Acquisition Subsidiary;
S and S was the surviving entity and became our wholly-owned subsidiary of Kona Gold.
F-
17
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Pursuant
to the Merger Agreement, and subject to the terms and conditions contained therein,
we acquired all of the shares of capital
stock of S and S from the five holders thereof (the "S and S Legacy Shareholders"). In consideration thereof, we issued to
them an aggregate of nine million restricted shares of our common stock (the "Acquisition Stock") on a pro rata basis. We
did not grant them any registration rights in respect of the shares of Acquisition Stock. We also agreed to pay an aggregate of $1,050,000
(the "Aggregate Acquisition Payments"), the majority of which is allocated to certain creditors of S and S (including one
of the S and S Legacy Shareholders) and approximately $89,000 of which (the "Remaining Acquisition Payments") is allocated
to the S and S Legacy Shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid within approximately
two weeks of the closing. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled
to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent
to $2.00 per case of Lemin Superior Lemonade, OOH LA Lemin (the product line of S and S) that we sell until the Aggregate Acquisition
Payments have been paid in full. In addition to the Aggregate Acquisition Payments, we also assumed and agreed to pay certain other liabilities
of S and S as set forth in the Merger Agreement. Because of this goodwill was recorded in the amount of $1,275,938, see Note 18 –
Acquisition of S and S Beverage, Inc.
Changes in goodwill are as follows:
March 31,
December 31,
2021
2020
Beginning of year
$
—
$
—
Acquired goodwill
1,275,938
—
Impairment
—
—
Total goodwill
$
1,275,938
$
—
Intangible asset consisted of the following:
March 31, 2021
December 31, 2020
Trademark (HighDrate)
$
81,750
$
81,750
Website Development (Ooh La Lemin)
12,201
—
Less: Accumulated Amortization
(14,510
)
(12,262
)
Total Intangible Asset
$
79,441
$
69,488
Estimated future amortization expense related to the intangible
asset is as follows:
Fiscal year ending:
December 31, 2021 (remaining 9 months)
7,046
December 31, 2022
9,395
December 31, 2023
9,395
December 31, 2024
9,395
December 31, 2025
9,395
Thereafter
34,815
$
79,441
F-
18
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 5 – NOTE RECEIVABLE
On May 26, 2016, Robert Clark, formed Elev8
Hemp, LLC, a Delaware limited liability company ("Elev8 Hemp"), on behalf of Ryan Medico, the Company's then-Chief Financial
Officer. Mr. Medico was the sole owner of and served as President of Elev8 Hemp.
In June 2016, the Company entered into a
letter of intent with Elev8 Hemp to acquire it, such that it would become the Company's wholly-owned subsidiary. Pursuant to the
letter of intent, on June 7, 2016, the Company entered into an Acquisition Agreement with Elev8 Hemp (the "Elev8 Hemp Acquisition
Agreement"), whereby the Company agreed to acquire 100% of the ownership of Elev8 Hemp and, in exchange, the Company agreed to issue
to Mr. Medico five million restricted shares of the Common Stock, which had a fair market value of $50,000. The Elev8 Hemp Acquisition
Agreement provided that if the Company failed to adequately capitalize the development of Elev8 Hemp to complete its objectives set forth
in its business plan, then Mr. Medico would have the option until March 31, 2018 to purchase Elev8 Hemp from the Company for a purchase
price of $50,000, which could be paid in shares of the Company's Common Stock.
On October 10, 2016, the Company entered
into a Membership Interest Purchase Agreement (the "Membership Interest Purchase Agreement") with Elev8 Hemp, as the Company's
wholly-owned subsidiary, 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 then-issued and outstanding membership interests of Elev8 Hemp to Branded Legacy in consideration
of its issuance to the Company of 200,000,000 shares of its common stock, par value $0.00001. In connection with this transaction, Mr.
Medico became the Chief Executive Officer and the sole director of Branded Legacy. The parties desired to enter into the Membership Interest
Purchase Agreement because the Company did not have adequate capital to fund the development of Elev8 Hemp's business, as well as
its own. Until July 2018, Mr. Medico also continued to serve as the Company's Chief Financial Officer.
On April 14, 2017, the Company's Board
of Directors (the "Board") declared a dividend to its stockholders of an aggregate of 53,196,608 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. On the record date, we had approximately 104 stockholders, all of whom received this dividend. After
the payment of the dividend, the Company held 146,803,392 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 with Branded Legacy the remaining 146,803,392 shares of common stock held by the Company for
2,746,723 shares of Branded Legacy's 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. At December 31, 2018, the balance of the investment in Branded Legacy was $1,648.
On November 26, 2019, we entered into a second
Securities and Exchange Agreement with Branded Legacy, whereby we exchanged the remaining investment of 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. As of the dates of the foregoing transactions, the Company and Branded Legacy were not considered related
parties based upon the guidance set forth in ASC Topic 850,
Related Party Disclosures
.
Management could not ascertain with certainty
of the collectability of the Branded Legacy Note due to the dollar amount and duration of the term; therefore, an allowance for $1,500,000
had been assessed and expensed, which was included in the Consolidated Statements of Loss for the year ended December 31, 2019. The Branded
Legacy Note and the investment in Branded Legacy consisted of the following:
March 31, 2021
December 31, 2020
Investment in Branded Legacy
$
—
$
—
Note receivable
1,500,000
1,500,000
Less: Allowance for doubtful account
(1,500,000
)
(1,500,000
)
Note receivable, net
$
—
$
—
F-
19
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 6 – STOCK-BASED COMPENSATION
The Company's directors, officers,
key employees, and non-employees were granted stock-based compensation consisting of restricted stock awards. Stock-based compensation
is measured at the grant date, based on the fair value of the award, and is recognized as an expense at the date of issuance. The Company
estimates the fair value of each restricted stock award as of the date of grant using closing price as reported by the OTCM on the date
of grant. The Board has not adopted any employee stock purchase plans or other incentive plans, nor does the Company grant stock options
to its directors, officers, and employees.
The share-based payments granted for the
three months ended March 31, 2021 and the year ended December 31, 2020, were 9,000,000 and 10,085,140 shares of the Common Stock, respectively.
No stock-based Common Stock was cancelled or forfeited for the three months ended March 31, 2021 and the year ended December 31, 2020,
respectively.
For the three months ended March 31, 2021
and 2020, the Company recognized stock-based compensation expense, which is included in selling, general and administrative expenses in
the accompanying Consolidated Statements of Loss, as follows:
Three Months Ended March 31,
Three Months Ended March 31,
2021
2020
Employee stock awards
$
—
$
318,500
Non-employee stock awards
270,900
—
Total stock-based compensation expense
$
270,900
$
318,500
The Company expenses stock-based compensation
cost in the current period at the grant date. No future years of compensation is expected for the next five fiscal years. The Company
has a balance in accrued stock-based compensation at March 31, 2021 and December 31, 2020, of $1,386,497 and $1,386,497, respectively.
NOTE 7 – LINE OF CREDIT
On May 5, 2018, Kona entered into a Line
of Credit Agreement with Matthew Nicoletti as the lender, which established a revolving line of credit in the amount of up to $400,000.
The line of credit matures on May 5, 2022 and is reflected as non-current on the accompanying Consolidated Balance Sheets. Advances under
the line of credit bear interest at the rate of 3.75 percent per annum. Payments of principal and accrued interest are payable on the
maturity date. At March 31, 2021 and December 31, 2020, the line of credit had an outstanding principal balance of $398,470, respectively,
and accrued interest of $35,787 and $32,102, respectively.
F-
20
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 8 – RELATED PARTY TRANSACTIONS
A.
Long-term debt consists of two note payables with a related party:
1)
On October 31, 2018, Kona
    issued a Standard Promissory Note in favor of Robert Clark, as lender, in the original principal amount of $20,000. Mr. Clark is
    the Company's President, Chief Executive Officer, Secretary, and Chairman of the Board. The note bears no interest. Principal
    payments of $500 per month commenced in February 2019, with the final payment due in April 2021. The outstanding principal balance
    of this note at March 31, 2021 and December 31, 2020 was $7,000 and $8,500, respectively.
See,
Note 21 – Subsequent
    Events.
2)
On February 19, 2019, Gold Leaf issued a Standard Promissory Note in Favor of Robert Clark, as lender, in the original principal amount of $70,000. The note bears no interest. Principal payments of $500 per month commenced in March 2019, with final payment due in March 2021. On March 15, 2021, Gold Leaf issued an Amendment to the original issued Standard Promissory Note in Favor of Robert Clark for the remaining outstanding principle of $58,000. Principal payment of $500 per month, with final payment due in March 2022. The outstanding principal balance of this note at March 31, 2021 and December 31, 2020 was $58,000 and $59,500, respectively.
The future maturities are as follows:
December 31, 2021(remaining 9 months)
$
65,000
$
65,000
B.
Lines of credit consists of two agreements with a related party:
1)
On April 4, 2019, Kona
    entered into a Line of Credit Agreement with Robert Clark. The agreement established a revolving line of credit in the amount of
    up to $1,500,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures
    on April 4, 2021, at which time all outstanding principal amounts and accrued interest are due and payable. At March 31, 2021 and
    December 31, 2020, outstanding principal was $1,372,651 and $1,369,651, respectively, and accrued interest was $48,757 and $36,397,
    respectively.
See,
Note 21 – Subsequent Events.
2)
On August 29, 2019, Gold Leaf entered into a Line of Credit Agreement with Robert Clark. The agreement established a revolving line of credit in the amount of up to $200,000. Advances under this line of credit bear interest at the rate of 3.75 percent per annum. The line of credit matures on August 29, 2021, at which time all outstanding principal amounts and accrued interest are due and payable. At March 31, 2021 and December 31, 2020, outstanding principal was $125,500 and $100,000, respectively, and accrued interest was $4,706 and $3,545, respectively.
NOTE 9 –
SECURITIES PURCHASE AGREEMENT, DERIVATIVE LIABILITIES, AND WARRANT
2020 Securities Purchase Agreement
In May 2020, the Company completed the 2020
Private Placement of the 2020 Debentures and the 2020 Warrant pursuant to the 2020 SPA. The Company sold and issued the First 2020 Debenture
and granted the 2020 Warrant promptly after entering in the 2020 SPA. The Company sold and issued the Second 2020 Debenture promptly after
filing the 2020 Registration Statement initially with the SEC. The Company sold and issued the Third 2020 Debenture promptly after the
SEC declared the Registration Statement effective. The 2020 Debentures are due 12 months from their respective issuance dates and are
secured by all of the Company's assets and the assets of each of its subsidiaries pursuant to that certain Security Agreement by
and among the Selling Stockholder, the Company's subsidiaries, and the Company. Initially, the 2020 Debentures are convertible at
the lower of (i) the fixed conversion price, which is $0.05 per share, subject to adjustment (the "2020 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, subject to adjustment (the "2020 Market Conversion Price"). The 2020 Debentures contain an
adjustment provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of its Common Stock
or common stock equivalents at a price lower than the then-current conversion
F-
21
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
price of the 2020 Debentures. Any stock splits, reverse
stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment
of the conversion price of the 2020 Debentures. The 2020 Debentures are subject to a "conversion blocker" such that the Selling
Stockholder cannot convert any portion of the 2020 Debentures that would result in the Selling Stockholder and its affiliates holding
more than 4.99% of the then-issued and outstanding shares of the Common Stock following such conversion (excluding, for purposes of such
determination, shares of the Common Stock issuable upon conversion of the 2020 Debentures or exercise of the 2020 Warrant that had not
then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% "conversion blocker" to 9.99%
upon at least 65 days' prior written notice to the Company. The 2020 Debentures accrue interest at an annual rate equal to 8% and
are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the 2020 Debentures or otherwise
accelerates the maturity date, as provided for in the 2020 Debentures). Interest is payable either in cash or, if certain Equity Conditions
(as defined in the 2020 Debentures) are then satisfied, in shares of the Common Stock at the 2020 Market Conversion Price on the trading
day immediately prior to the date paid.
At the Company's option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2020 Debentures prior to their respective maturity
dates;
provided
,
that
, as of the date of the holder's receipt of the redemption notice, (i) the VWAP of the Common
Stock is less than the 2020 Fixed Conversion Price, initially $0.05 per share, and (ii) there is no Equity Conditions failure. The Company
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"). The Company must provide
the holder 15 business days' advance notice of its intent to make a redemption, setting forth the amount of principal and interest
we desire then to redeem plus the applicable Redemption Premium.
The 2020 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of the Common Stock or common
stock equivalents at a price lower than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits,
recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the
conversion price of the 2020 Debentures.
Pursuant to the terms of the Registration
Rights Agreement, the Company agreed to file the Registration Statement with the SEC registering for resale the Conversion Shares and
the Warrant Shares within 45 calendar days following the closing of the 2020 Private Placement. The Company also agreed, among other things,
to indemnify the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by the Company in connection with
the registration of the Conversion Shares and the Warrant Shares held by the Selling Stockholder.
Pursuant to the 2020 SPA, the purchase price
for the First 2020 Debenture was $250,000, less $15,000 for origination fees, which consisted of the "original issue discount"
of $10,000 and $5,000 as a structuring fee. On December 23, 2020, the Company converted $100,000 of the principal of, and $12,274 of accrued
interest on, the First 2020 Debenture into 8,255,438 shares of the Company's common stock. On January 25, 2021, the Company converted
$150,000 of the principal of, and $1,118 of accrued interest on, the First 2020 Debenture into 7,094,732 shares of the Company's
common stock, see Note 11,
equity transactions
. At March 31, 2021, no balance remains on the principal balance of the First 2020
Debenture.
Pursuant to the 2020 SPA, the purchase price
for the Second 2020 Debenture was $250,000, less $10,000 for origination fees, which consisted of the "original issue discount"
of $10,000 fee. On January 25, 2021, the Company converted $100,000 of the principal of, and $10,410 of accrued interest on, the Second
2020 Debenture into 5,183,613 shares of the Company's common stock. On February 19, 2021, the Company converted $150,000 of the
principal of, and $855 of accrued interest on, the Second 2020 Debenture into 7,252,634 shares of the Company's common stock see
Note 11,
equity transactions
. At March 31, 2021, no balance remains on the principal balance of the First 2020 Debenture.
F-
22
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Pursuant to the 2020 SPA, the purchase price
for the Third 2020 Debenture was $500,000, less $10,000 for origination fees, which consisted of the "original issue discount"
of $10,000 fee. On January 12, 2021, the Company converted $200,000 of the principal of, and $1,425 of accrued interest on, the First
2020 Debenture into 10.887,819 shares of the Company's common stock, see Note 11,
equity transactions
. At March 31, 2021,
the principal balance of the Third 2020 Debenture is $300,000.
2021 Securities Purchase Agreement
In February 2021, the Company completed a
private placement transaction (the "2021 Private Placement") with the Selling Stockholder of two secured convertible debentures
(the "2021 Debentures"), convertible for up to 154,958,678 shares (the "2021 Conversion Shares") of Common Stock
and granted a Warrant to purchase Common Stock (the "2021 Warrant"), exercisable for up to 50,000,000 shares of Common Stock
(the "2021 Warrant Shares"), pursuant to that certain Securities Purchase Agreement between the Selling stockholder and the
Company, dated as of February 10, 2021 (the "2021 SPA"). The Company sold and issued the initial 2021 Debenture (the "First
2021 Debenture") and granted the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second
2021 Debenture (the "Second 2021 Debenture") promptly after the SEC declares effective the 2021 Registration Statement (as
defined below). On May 5, 2021, the Company and the Selling Stockholder entered into a Limited Amendment Agreement, pursuant to which
we agreed to a partial Second Closing, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture
in the face amount of $200,000 for a purchase price of $192,000.
The 2021 Debentures are due 12 months from
their respective issuance dates and are secured by all of the Company's assets and the assets of each of its subsidiaries pursuant
to that certain Security Agreement by and among the Selling Stockholder, the Company's subsidiaries, and the Company. Initially,
the 2021 Debentures are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the
"2021 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, subject to adjustment (the "2021 Market Conversion
Price"). The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if
the Company issues shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the
2021 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and
similar events will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a
"conversion blocker" such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result
in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following
such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures
or exercise of the 2021 Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that
4.99% "conversion blocker" to 9.99% upon at least 65 days' prior written notice to the Company. The 2021 Debentures
accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder
converts the 2021 Debentures or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable
either in cash or, if certain Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock
at the 2021 Market Conversion Price on the trading day immediately prior to the date paid.
At the Company's option, it has the
right to redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity
dates; provided, that, as of the date of the holder's receipt of the redemption notice, (i) the VWAP of the Common Stock is less
than the 2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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"). The Company must provide the holder
15 business days' advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.
F-
23
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The 2021 Debentures contain an adjustment
provision that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock
equivalents at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.
Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the "original issue discount"
of $36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an "original issue discount."
In connection with the 2021 Private Placement,
the Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has
a three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails
to maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default
(as defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a "cashless" basis. "Event
of Default" means an event of default under the 2021 SPA or the 2021 Debentures.
The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.
The 2021 Warrant is subject to an "exercise
blocker" such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% "exercise blocker"
to 9.99% upon at least 65 days' prior written notice to the Company.
Pursuant to the terms of the 2021 Registration
Rights Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the "2021 Registration
Statement") with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the
F-
24
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.
Pursuant to the 2021 SPA, the purchase price
for the First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the "original issue discount"
of $36,000 and $5,000 as a structuring fee. At March 31, 2021, the principal balance of the First 2021 Debenture is $900,000.
Derivative Liability
The 2020 and 2021 Debentures have been accounted
for utilizing ASC 815. The Company has incurred a liability for the estimated fair value of the First 2020 Debenture. The estimated fair
value of the 2020 Debentures has been calculated using the Black-Scholes fair value option-pricing model with key input variables provided
by management, as of the date of issuance, with the valuation offset against additional paid in capital, and at each reporting date, with
changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company identified embedded features in
the 2020 and 2021 Debentures, which caused the 2020 and 2021 Debentures to be classified as a liability. These embedded features included
the right for the holder to request for the Company to settle the amounts owed pursuant to the 2020 and 2021 Debentures to the holder
by paying an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of the 2020 and 2021 Debentures on the
date of the consummation of a fundamental transaction. The accounting treatment of derivative financial instruments requires that the
Company treat the whole instrument as liability and record the fair value of the instrument as a derivative as of the inception date of
the instrument and to adjust the fair value of the instrument as of each subsequent balance sheet date.
The derivative liabilities were valued using
Black-Scholes pricing model with the following average assumptions:
March 31, 2021
Stock Price
$
0.0327
Exercise Price
$
0.0276
Expected Life
1
Volatility
99.5
%
Dividend Yield
0
%
Risk-Free Interest Rate
.06
%
Fair Value
$
627,018
F-
25
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The following table summarizes the changes
in the Company's assets and liabilities measured at fair value as of March 31, 2021:
March 31, 2021
Quoted prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
Convertible promissory notes with embedded conversion option
$
627,018
$
627,018
Total
$
627,018
$
627,018
The following table sets forth a summary
of change in fair value of the Company's derivative liabilities for the year ended March 31, 2021:
Fair value, January 1, 2020
$
—
Change in fair value of embedded conversion features of debenture included in earnings
—
Embedded conversion option liability recorded in connection with the issuance of 2020 debenture
148,628
Fair value, June 30, 2020
$
148,628
Change in fair value of embedded conversion features of debenture included in earnings
(39,725
)
Embedded conversion option liability recorded in connection with the issuance of 2020 debentures
108,903
Fair value, September 30, 2020
$
217,806
Change in fair value of embedded conversion features of debenture included in earnings
(69,051
)
Embedded conversion option liability recorded in connection with the issuance of 2020 debentures
212,397
Fair value, December 31, 2020
$
361,152
Change in fair value of embedded conversion features of debenture included in earnings
(202,443
)
Embedded conversion option liability recorded in connection with the issuance of 2021 debentures
468,309
Fair value, March 31, 2021
$
627,018
Warrant
The Company also granted the 2020 Warrant
and the 2021 Warrant to purchase up to an aggregate of 20 million shares and 50 million shares of Common Stock, respectively. The 2020
Warrant and the 2021 Warrant each has a three-year term and each is immediately exercisable at an exercise price of $0.05 per share for
the 2020 Warrant and $0.03 per share for the 2021 Warrant, each subject to adjustment. If the Company fails to maintain an effective registration
statement with the SEC covering the resale of the 2020 Warrant Shares and the 2021 Warrant Shares, or if an Event of Default (as defined
below) has occurred and is continuing, then the holder may exercise, respectively, the 2020 Warrant and the 2021 Warrant on a "cashless"
basis. "Event of Default" means an event of default under the 2020 SPA and the 2021 SPA or the 2020 Debentures and the 2021
Debentures, respectively.
The 2020 Warrant and the 2021 Warrant, respectively,
contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common
Stock or common stock equivalents at a price lower than the then-current exercise price of the 2020 Warrant and the 2021 Warrant, respectively.
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 2020 Warrant and the 2021 Warrant, respectively.
F-
26
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The 2020 Warrant and the 2021 Warrant, respectively,
is subject to an "exercise blocker" such that the Selling Stockholder cannot exercise any portion, respectively, of the 2020
Warrant that and the 2021 Warrant would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued
and outstanding shares of the Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common
Stock issuable, respectively, upon exercise of the 2020 Warrant and the 2021 Warrant or conversion of the 2020 Debentures and the 2021
Debentures, respectively, that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99%
"exercise blocker" to 9.99% upon at least 65 days' prior written notice to the Company.
During the year ended December 31, 2020,
the Company granted the 2020 Warrant that was immediately exercisable for up to 20,000,000 shares of Common Stock. During the three months
ended March 31, 2021, the Company granted the 2021 Warrant that was immediately exercisable for up to 50,000,000 shares of Common Stock.
The 2020 Warrant and the 2021 Warrant, respectively, was fully expensed as an interest expense related to the 2020 Warrant and the 2021
Warrant issued in connection with the consummation of the transactions contemplated by the 2020 SPA and 2021 SPA, respectively, and no
liability was recorded as of March 31, 2021 and December 31, 2020, respectively.
NOTE 10 – PAYCHECK PROTECTION PROGRAM LOAN
On May 4, 2020,
the Company entered into a Paycheck Protection Promissory Note in the original principal amount of $95,161 (the "PPP Loan")
with Wells Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program
(the "PPP"), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the ("CARES Act")
and is administered by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5
times of the average monthly payroll expenses of the qualifying business. The current term of the PPP Loan is two years, with a maturity
date of May 6, 2022 and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan
are deferred until the date on which the amount of the forgiveness determined under the PPP Program Requirements is remitted to Lender
and shall continue monthly until loan maturity. If the Borrower fails to apply for forgiveness within 10 months after the last day of
the Covered Period, as defined in the PPP Program Requirements, monthly principal and interest payments shall commence 10 months from
the last day of the Covered Period. Payments of principal and interest must be made on such date as designated by Lender in the months
that they are due Thereafter, principal and interest are payable monthly and may be prepaid by us at any time prior to maturity with no
prepayment penalties.
In January 2021,
the Company entered into a Paycheck Protection Promissory Note in the original principal amount of $117,487 (the "PPP Loan 2")
with Wells Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program
(the "PPP"), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the ("CARES Act")
and is administered by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5
times of the average monthly payroll expenses of the qualifying business. The current term of the PPP Loan is five years, with a maturity
date of January 2026 and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan
are deferred for the first six months of the term of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly
and may be prepaid by us at any time prior to maturity with no prepayment penalties.
F-
27
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Under the terms
of the CARES Act, recipients can apply for and receive forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness
will be determined, subject to limitations, based on the use of loan proceeds for certain permissible purposes as set forth in the PPP,
including, but not limited to, payroll costs, mortgage interest, rent or utility costs (collectively, "Qualifying Expenses"),
and on the maintenance of employee and compensation levels during a certain time period following the funding of the PPP Loan. The amount
of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The Company
has used the proceeds of the PPP Loan for salaries and wages, building lease expense, and utilities. However, no assurance is provided
that the Company will be able to obtain forgiveness of the PPP Loan in whole or in part.
In May 2020, the
Company also received an advance in the amount of $7,000 as part of the Economic Injury Disaster Loan program offered by the U.S. Small
Business Administration. This advance was received after the Company filed its application with regarding to the PPP. The advance was
not included in any of the documentation related to the PPP Loan. The Company is in the process of determining how this advance will be
included as part of the PPP Loan forgiveness.
NOTE 11 – EQUITY TRANSACTIONS
Preferred Stock
The Company's
issued and outstanding preferred stock, par value $0.00001 per share, at March 31, 2021 and December 31, 2020 was 988,140, respectively.
The Board, without further stockholder approval, may issue preferred stock in one or more series from time to time and fix or alter the
designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series.
Series A Preferred
Stock
The Company had
authorized 4,000,000 shares of Series A Preferred Stock, par value of $0.00001 per share (the "Series A Preferred Stock"),
of which no shares were authorized, issued or outstanding at March 31, 2021 and December 31, 2020 and 4,000,000 shares were authorized,
issued and outstanding at March 31, 2021 and December 31, 2020. Each share of Series A Preferred Stock, when outstanding, could have been
converted into one share of the Common Stock.
Series B Preferred
Stock
The Company had
authorized 1,200,000 shares of Series B Preferred Stock, par value of $0.00001 per share (the "Series B Preferred Stock"),
of which 488,000 were issued and outstanding at March 31, 2021 and December 31, 2020, respectively. Each share of Series B Preferred Stock
may be converted into one share of the Common Stock.
Series C Preferred
Stock
On July 8, 2020,
the Company reduced the authorized number of Series C Preferred Stock from 3,300,000 to 250 shares, par value $0.00001 per share (the
"Series C Preferred Stock"), by filing a Certificate of Designation of the Preferences, Rights, and Limitations of the Series
C Preferred Stock with the Secretary of State of the State of Delaware. The Company also amended the terms of the Series C Preferred Stock.
The holders of shares of the Series Preferred C Stock are now entitled to 2,000,000 votes for every share of our Series Preferred C Stock
held. The holders of the Series Preferred C Stock are not entitled to receive dividends. Upon any liquidation, dissolution, or winding
up of the Company, whether voluntary or involuntary, before any distribution or payment will be made to the holders of any stock ranking
junior to the Series C Preferred Stock, the holders of the Series C Preferred Stock will be entitled to be paid out of the Company's
assets an amount equal to $1.00 in the aggregate for all issued and outstanding shares of the Series C Preferred Stock (as adjusted for
any stock dividends, combinations, splits, recapitalizations, and the like with respect to such shares) (the "Preference Value").
After the payment of the full applicable Preference Value of each share of the Series C Preferred Stock, our remaining assets legally
available for distribution, if any, will be distributed ratably to the holders of the Common Stock. The Series C Preferred Stock has conversion
rights, whereby each share of the Series C Preferred Stock automatically converts into one share of Common Stock on the one-year anniversary
of the issuance date.
F-
28
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2021 and
December 31, 2020, the Company had authorized 250 shares, respectively, of Series C Preferred Stock of which 140, respectively, were issued
and outstanding at March 31, 2021 and December 31, 2020, respectively. At such dates, each share of the Series C Preferred Stock was convertible
into one and 1,000 shares, respectively of the Common Stock.
Series D Preferred
Stock
The Company had
authorized 500,000 shares of Series D Preferred Stock, par value of $0.00001 per share (the "Series D Preferred Stock"), of
which 500,000 shares were issued and outstanding at March 31, 2021 and December 31, 2020, respectively. Each share of the Series D Preferred
Stock may be converted into 1,000 shares of Common Stock.
Common Stock
The Company had
authorized 2,500,000,000 shares of the Common Stock, respectively, of which 825,726,839 shares were issued and outstanding at March 31,
2021 and 786,308,041 were issued and outstanding at December 31, 2020.
Equity Transactions
On July 10, 2020,
the Company issued an aggregate of 4,000,000 shares of Common Stock upon the conversion of an aggregate of 4,000,000 shares of our Series
A Preferred Stock by 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).
On December 23,
2020, the Company issued an aggregate of 8,255,438 shares of Common Stock upon the conversion of $100,000 of the principal of, and $12,274
of accrued interest on, the First 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0170.
The First 2020 Debenture was converted at the conversion price of $0.0136, which was the lower of the 2020 Fixed Conversion Price and
the 2020 Market Conversion Price.
On January 12, 2021, the Company issued an
aggregate of 10,887,819 shares of Common Stock upon the conversion of $200,000 of the principal of, and $1,425 of accrued interest on,
the Third 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0231. The Third 2020 Debenture
was converted at the conversion price of $0.0185, which was the lower of the 2020 Fixed Conversion Price and the 2020 Market Conversion
Price.
On January 25, 2021,
the Company issued an aggregate of 7,094,732 shares of Common Stock upon the conversion of $150,000 of the principal of, and $1,118 of
accrued interest on, the First 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The
First 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2020 Fixed Conversion Price and the
2020 Market Conversion Price.
On January 25, 2021,
the Company issued an aggregate of 5,183,613 shares of Common Stock upon the conversion of $100,000 of the principal of, and $10,411 of
accrued interest on, the Second 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The
Second 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2020 Fixed Conversion Price and the
2020 Market Conversion Price.
F-
29
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Pursuant to the
Agreement and Plan of Merger with S and S Beverage, Inc., the Company issued 9,000,000 shares of its common stock to the legacy S and
S Beverage, Inc. shareholders as follows: 6,300,000 shares to K & L Beverage; 1,980,000 shares to William J. Stineman; 360,000 shares
to William F. Stineman; 270,000 shares to Gary Kramer; and 90,000 shares to Steven Sirus. The per-share fair market value of the common
stock was $0.0301, based on the closing price of the Company's common stock, as reported by OTC Markets Group Inc. on February 5,
2021, the date on which the Company filed its Current Report on Form 8-K disclosing the acquisition.
On February 19,
2021, the Company issued an aggregate of 7,252,634 shares of Common Stock upon the conversion of $150,000 of the principal of, and $855
of accrued interest on, the Second 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0260.
The Second 2020 Debenture was converted at the conversion price of $0.0208, which was the lower of the 2020 Fixed Conversion Price and
the 2020 Market Conversion Price.
For other equity
issuances during the three month ended March 31, 2021 and the year ended December 31, 2020, please see Note 12,
Employees
and Note
13,
Sponsorships.
NOTE 12 – EMPLOYEES
On August 12, 2015, the Company entered into
an Employment Agreement with Robert Clark (the "Clark Employment Agreement"). On December 1, 2016, the Company entered into
an Amendment to Employment Agreement (the "Clark Amendment"; and, together with the Clark Employment Agreement, the "Amended
Clark Employment Agreement"). Pursuant to the terms of the Amendment Clark Employment Agreement, the Company agreed to issue, among
other securities, 200,000,000 shares of the Common Stock. Immediately, Mr. Clark decided to defer receipt of 80,000,000 of such shares;
thus leaving 120,000,000 shares of the Common Stock to be issued to him. Those 120,000,000 shares of the Common Stock were issued to Mr.
Clark, as follows: (i) on October 28, 2015, the Company issued 30,000,000 of such shares at the per-share fair market value of $0.015,
based on the closing price of the Common Stock as reported by the OTCM on the date of issuance; (ii) on March 2, 2016, the Company issued
40,000,000 of such shares at the per-share fair market value of $0.0250 based on the closing price of the Common Stock as reported by
the OTCM on the date of issuance; and (iii) on Mary 16, 2016, the Company issued 50,000,000 of such shares at the per-share fair market
value of $0.0036 based on the closing price of the Common Stock as reported by the OTCM on the date of issuance. The Company accrued 80,000,000
shares of the 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 the 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 valued at $1,000,000 by Mr. Clark. On July 31, 2019, an additional 50,000,000
shares were cancelled and returned to the Company for accrual valued at $180,000. Accordingly, as of June 30, 2020, Mr. Clark was the
record and beneficial owner of 17,100,000 of shares of the Common Stock and, subject to the July 2020 issuance to Mr. Clark of 140 shares
of Series C Preferred, the Company accrued and owed to Mr. Clark an aggregate of 170,000,000 shares to be reissued to him upon his request
pursuant to the terms of the oral agreement with him.
The Company issued 5,000,000 shares of Common
Stock on January 27, 2020 to Lori Radcliffe pursuant to that certain Employment Agreement dated October 7, 2019, by and between Ms. Radcliffe
and the Company. At the date of issuance, the per-share fair market value of the shares was $0.0637 based on the closing price of the
Common Stock as reported by the OTCM on the date of issuance, for a total value of $318,500.
F-
30
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
On April 3, 2020,
the Company issued 5,000,000 shares of the Common Stock to Paul O'Renick pursuant to an Employment Agreement dated October 1, 2019
in exchange for compensation owed in the amount of $157,500 for services provided. At the date of issuance, the per-share fair market
value was $0.0315 based on the closing price of the Common Stock as reported by the OTCM on the date of issuance.
NOTE 13 – SPONSORSHIPS
On May 1, 2019,
the Company entered into a sponsorship agreement with Ryan Dodd, a professional waterski jumper (the "Dodd Agreement"), whereby
the Company agreed to pay monthly sponsorship fees of $1,250 for one year. On May 23, 2019, the Company issued Mr. Dodd 262,500 shares
of Common Stock. 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 the Common Stock on the date of issuance as reported by the OTCM, representing $34,388 as payment for the Company's sponsorship.
The Dodd Agreement was extended in January 2020 for an additional one-year term. On April 3, 2020, the Company issued 85,000 shares of
the Common Stock 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 the Common Stock as reported by the OTCM on the date of issuance, representing a payment of $2,578 for sponsorship
fees.
NOTE 14 – COMMITMENTS AND CONTINGENCIES
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. The following represents the Company's commitments and contingencies
as of December 31, 2020:
Operating Lease – The Company
currently leases 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 1st thereafter.
During the lease year that commenced on June 1, 2020, the Company's monthly base rent will be $4,114. For the three months ended
March 31, 2021, the Company recognized operating lease expense of $13,180, which is included in in selling, general and administrative
expenses in the accompanying Consolidated Statements of Loss.
NOTE 15 – LEASE LIABILITIES
The Company reported the following operating
lease liabilities as of March 31, 2021:
A.
Right-of-Use Operating Lease – On May 22, 2019, Gold Leaf entered into a lease agreement for 30,000 square feet of office and warehouse space in Greer County, South Carolina. The agreement includes monthly payments of $13,429, and included a $6,500 deposit. For the three months ended March 31, 2021, the Company recognized right-of-use operating lease expense of $28,125, which is included in in selling, general and administrative expenses in the accompanying Consolidated Statements of Loss.
B.
On March 17, 2020, Kona entered into a lease agreement for equipment. The agreement includes monthly payments of $676. For the three months ended March 31, 2021, the Company recognized right-of-use operating lease expense of $1,859, which is included in in selling, general and administrative expenses in the accompanying Consolidated Statements of Loss.
F-
31
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Amounts recognized as right-of-use assets,
net related to operating leases are included in noncurrent assets in the accompanying Consolidated Balance Sheet, while related lease
liabilities are included in current portion of long-term debt and long-term debt. At March 31, 2021 and December 31, 2020, the right-of-use
asset and lease liability related to the operating leases were as follows:
March 31, 2021
December 31, 2020
Right-of-use asset
$
1,072,094
$
1,072,094
Amortization of right-of-use asset
(196,124
)
(159,101
)
Right-of-use asset, net
$
875,970
$
912,993
Operating lease liability
Current portion of long-term lease
$
112,383
$
149,407
Long-term lease
763,587
763,586
Total operating lease liability
$
875,970
$
912,993
The future payments due under operating leases
is as follows:
Fiscal year ending:
December 31, 2021 (9 months remaining)
112,383
December 31, 2022
154,416
December 31, 2023
160,631
December 31, 2024
167,587
December 31, 2025
167,537
2026 and thereafter
113,416
$
875,970
NOTE 16 – REVENUE
The Company determined that the majority
of the Company's revenue earned from its two reporting segments is recognized when it satisfies a single performance obligation
by transferring control of its products to a customer. The Company does not have a significant financing component or payment terms, and
the Company does not have any material unsatisfied performance obligations. The Company's revenues are obtained in similar geographical
locations within the United States. The Company's operating segments are expected to have essentially the same future prospects,
similar gross margins, sales trends, and the nature of our products and customers are essentially the same. Furthermore, the Company regularly
reviews disaggregated revenue by source for evaluating the financial performance of its operations and making resource decisions. The
Company's revenue is broken down by the following:
●
Distributors – revenue derived from direct sales to distributors for resale of its products: Kona Gold hemp-infused energy drinks, HighDrate CBD-infused energy waters, Storm CBD-infused water, and OOH LA Lemin lemonade beverages.
●
Amazon Sales – revenue derived from customer purchases through Amazon.com of our Kona Gold hemp-infused energy drinks.
●
Online Sales – revenue derived from customer purchases through the Company's websites: KonaGoldHemp.com, HighDrateMe.com, and drinklemin.com of the following products: Kona Gold hemp-infused energy drinks and apparel, HighDrate CBD-infused energy waters, Storm CBD-infused water, and OOH LA Lemin lemonade beverages.
●
Gold Leaf Distribution – revenue derived from Gold Leaf, which is the Company's wholly-owned subsidiary, that focuses on the distribution of premium beverages and snacks in key markets. These markets include over 600 accounts in grocery stores, convenience stores, smoke shops, vape shops, and specialty stores located in Florida and South Carolina. 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 the Company's current product offerings.
●
Shipping – revenue derived from shipping from direct sales of the Company's product through KonaGoldHemp.com, HighDrateMe.com, and drinklemin.com.
●
Sales Returns and Allowances – the amount reduced from all revenue sources to allow for product returns.
F-
32
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The following tables presents our net revenues, by revenue source,
and the period-over-period percentage change, for the period presented:
Three Months Ended March 31,
2020
2021
Revenue Source
Revenue
Revenue
% Change
Distributors
$
107,292
$
243,788
127
%
Amazon
27,358
38,502
41
%
Online Sales
11,189
18,204
63
%
Gold Leaf Distribution
54,836
180,217
229
%
Shipping
5,006
5,110
2
%
Sales Returns and Allowances
(3,624
)
(23,413
)
546
%
Net Revenues
$
202,057
$
462,408
129
%
The following tables presents our net revenues,
by revenue source, as a percentage of total net revenues for the periods presented:
Three Months Ended March 31,
Revenues
2020
2021
Distributors and Resellers
53
%
53
%
Amazon
14
%
8
%
Online Sales
6
%
4
%
Gold Leaf Distribution
27
%
39
%
Shipping
2
%
1
%
Sales Returns, and Allowances
(2
)%
(5
)%
NOTE 17 – SEGMENTS
The Company has two reportable segments:
●
Beverages.
Includes three types of beverage products: (i) hemp-infused energy drinks, (ii) CBD-infused energy water, (iii) CBD-infused high-alkaline water, and (iv) lemon-flavored beverages, as well as apparel with the Kona Gold logo. The Beverages Segment includes all of Kona's and HighDrate's operations. The Company considers this a single operating segment for purposes of presenting financial information and evaluating performance. As such, the accompanying
C
onsolidated
F
inancial
S
tatements present financial information in a format that is consistent with the internal financial information used by management. We do not accumulate revenues by product classification and, therefore, it is impractical to present such information.
●
Distribution.
Includes the distribution of premium beverages and snacks 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. In addition to distributing the Company's own beverage products, the Company also distributes other products, including alkaline waters, beverages for kids, energy drinks, fruit flavored sodas, low-carb lemonade, healthy aloe juice drinks, and CBD-infused jellybeans, all of which complement the Company's current product offerings. The Distribution Segment includes all of Gold Leaf's operations.
F-
33
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
Amounts that do not relate to a reportable
segment have been allocated to "Corporate and Eliminations."
The following tables present information
about our reportable segments.
March 31, 2021
December 31, 2020
CURRENT ASSETS:
Beverages Segment
$
1,242,543
$
933,148
Distribution Segment
(190,620
)
(139,028
)
Corporate and eliminations
—
—
Total Current Assets
$
1,051,923
$
794,120
NON-CURRENT ASSETS:
Beverages Segment
$
2,319,444
$
1,063,074
Distribution Segment
87,569
85,546
Corporate and eliminations
9,066
8,233
Total Non-Current Assets
$
2,416,079
$
1,156,853
CURRENT LIABILITIES:
Beverages Segment
$
2,617,407
$
1,880,762
Distribution Segment
50,590
80,442
Corporate and eliminations
1,997,564
1,425,552
Total Current Liabilities
$
4,664,771
$
3,376,248
NON-CURRENT LIABILITIES:
Beverages Segment
$
2,715,776
$
2,616,018
Distribution Segment
213,080
192,350
Corporate and eliminations
—
—
Total Non-Current Liabilities
$
2,928,856
$
2,808,368
Three Months Ended March 31,
2020
2021
REVENUES, NET OF SALES, RETURNS, AND ALLOWANCES:
Beverages Segment
$
179,927
$
310,093
Distribution Segment
54,836
180,351
Corporate and Eliminations
(32,706
)
(28,036
)
Total Revenues, Net of Sales, Returns, and Allowances
$
202,057
$
462,408
COST OF REVENUES:
Beverages Segment
138,063
193,369
Distribution Segment
40,610
128,750
Corporate and Eliminations
(32,706
)
(8,199
)
Total Cost of Revenues
$
145,967
$
313,920
OPERATING EXPENSES:
Beverages Segment
$
529,515
$
410,914
Distribution Segment
38,148
90,888
Corporate and Eliminations
79,556
67,178
Total Operating Expenses
$
647,219
$
568,980
OTHER INCOME / (EXPENSE):
Beverages Segment
$
(3,807
)
$
(16,213
)
Distribution Segment
—
(1,160
)
Corporate and Eliminations
—
(1,381,678
)
Total Other Income / (Expense)
$
(3,807
)
$
(1,399,051
)
NET LOSS:
Beverages Segment
$
(571,014
)
$
(310,403
)
Distribution Segment
(23,922
)
(40,447
)
Corporate and Eliminations
—
(1,468,693
)
Total Net Loss
$
(594,936
)
$
(1,819,543
)
F-
34
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
NOTE 18 – ACQUISITION OF S AND S BEVERAGE,
INC.
On January 21, 2021,
the Company entered into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders and acquired all of the capital
stock of S and S Beverage Inc. ("S and S"). To consummate the Acquisition, a Certificate of Merger with the Wisconsin Department
of Financial Institutions (the "Merger Certificate") on February 1, 2021. On January 22, 2021, (i) Kona Gold, (ii) KGS Temporary
Company, Inc. (Kona Gold Beverage, Inc. "Acquisition Subsidiary"), (iii) S and S, (iv) William J. Stineman and K&L Beverage,
LLC, a Wisconsin limited liability company (as the indemnifying S and S shareholders), and (v) Mr. Stineman (as representative of the
S and S Shareholders) entered into the Agreement and Plan of Merger (the "Merger Agreement"). S and S merged with and into
our Acquisition Subsidiary; S and S was the surviving entity and became our wholly-owned subsidiary of Kona Gold Beverage, Inc.
Pursuant
to the Merger Agreement, and subject to the terms and conditions contained therein,
we acquired all of the shares of capital
stock of S and S from the five holders thereof (the "S and S Legacy Shareholders"). In consideration thereof, we issued to
them an aggregate of nine million restricted shares of Kona Gold Beverage, Inc.'s common stock (the "Acquisition Stock")
on a pro rata basis. Kona Gold Beverage, Inc. did not grant them any registration rights in respect of the shares of Acquisition Stock.
We also agreed to pay an aggregate of $1,050,000 (the "Aggregate Acquisition Payments"), the majority of which is allocated
to certain creditors of S and S (including one of the S and S Legacy Shareholders) and approximately $89,000 of which (the "Remaining
Acquisition Payments") is allocated to the S and S Legacy Shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition
Payments are scheduled to be paid in the next two weeks. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition
Payments, are scheduled to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10,
2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now named OOH LA Lemin (the product line of S and S), that we
sell until the Aggregate Acquisition Payments have been paid in full. In addition to the Aggregate Acquisition Payments, we also assumed
and agreed to pay certain other liabilities of S and S as set forth in the Merger Agreement.
F-
35
The following is a balance sheet comparison
of S and S Beverage as of January 21, 2021:
Balance Sheet
Book Value
Fair Value
Accounts receivable, net of allowance of $24,280
$
9,437
$
33,717
Inventory
240,797
249,648
Property, plant and equipment, net (Website Development)
12,201
12,201
Total Assets
$
262,435
$
295,566
Accounts payable and accrued liabilities
$
55,553
$ 956.
Outstanding checks
23,058
—
Interest payable
11,915
—
Due to customers
19,667
—
Current note payable - related party
811,761
1,050,000.00
Common Stock, $30.05 par value, 10,000 shares issued and outstanding, respectively
300,500
Additional paid-in-capital
437,701
Accumulated deficit
(1,397,720
)
Total liabilities and stockholders' deficit
$
262,435
The following is the accounts included in
the Company's accompanying balance sheet dated March 31, 2021 as a result of the acquisition:
Balance Sheet
Accounts receivable
$
33,717
Website Development (Ooh La Lemin)
12,201
Goodwill
1,275,938
Total Assets
$
1,321,856
Accounts payable and accrued liabilities
$
956
Loan on Acquisition
650,000
Due to merger payments
400,000
Common stock, $.00001 par value, 9,000,000 shares issued
90
Additional paid-in capital
270,810.00
Total liabilities and stockholders' deficit
$
1,321,856
NOTE 19 – GOING CONCERN
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 Consolidated Financial Statements, during the three months ending March
31, 2021, the Company incurred a net loss of $1,819,543, used cash in operations of $312,712 and had a stockholders' deficit of
$4,126,416 as of March 31, 2021. In the year ending December 31, 2020, the Company incurred a net loss of $3,125,595, used cash in operations
of $1,370,123 and had a stockholders' deficit of $4,244,153 as of December 31, 2020.
F-
36
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The Company attributes this increase to losses
incurred from corporate related expenses. During the first quarter of fiscal 2021, the Company signed a Securities Purchase Agreement,
whereas, the Company incurred interest expense to warrants on a convertible note and a loss on the derivatives, which were integral to
the growth of the Company. In addition, the Company attributes the increase to costs related to our Beverages Segment of selling, general
and administrative expenses, specifically salaries, which are integral to the success of the Company. The Company continues to be impacted
by the COVID-19 pandemic during the first quarter of the 2021 fiscal year as the Company makes an effort to sign more favorable agreements
with larger, reputable tier 1 and mid-size distributors and grocery chains. These contracts saw unforeseen delays and were additionally
impacted by the COVID-19 pandemic during the 2020 fiscal year. The COVID-19 delayed the Company's launch of a variety of new products
during most of the 2020 fiscal year – drinks and non-drink line broadening items. Despite the increase, the Company realized an
increase in sales in the first quarter of fiscal 2021 over the previous first quarter of fiscal 2020. The Company attributes this to the
acquisition of S and S Beverage, Inc. which has added to the Company's portfolio. In addition, the Company has signed more favorable
with larger, reputable tier 1 and mid-size distributors and grocery chain that saw unforeseen delays and were impacted by the COVID-19
pandemic. We expect that revenue will increase in the remaining three quarters of fiscal year 2021 as distribution related to our current
distributors affected by COVID-19 that have resumed distribution will continue to see fewer impacts from the COVID-19 pandemic going forward.
The Company will continue to sign favorable agreements with larger, tier 1 and mid-size distributors in our Beverages Segment during fiscal
2021.
As a result, the Company's continuation
as a going concern is dependent on the 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. 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 accompanying Consolidated Financial Statements do not include
any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 20 – CONCENTRATIONS
The Company had certain customers whose revenue
individually represented 10% or more of the Company's total revenue, less intercompany transactions. In addition, certain customers
had outstanding accounts receivables that individually represented 10% or more of the Company's total outstanding accounts receivables,
less intercompany transactions, but before receivable allowances. These customers are as follows:
In the accompanying Consolidated Balance
Sheet as of March 31, 2021, the Company's net accounts receivable were $111,676, representing total accounts receivable of approximately
$153,213 less sales returns and allowance of approximately $37,570 and less doubtful accounts of approximately $3,967. In the accompanying
Consolidated Balance Sheet as of December 31, 2020, the Company's net accounts receivable were $(10,508), representing total accounts
receivable of approximately $22,166 less sales returns and allowance of approximately $28,707 and less doubtful accounts of approximately
$3,967. The breakdown of the Company's accounts receivable is as follows:
March 31, 2021
December 31, 2020
Total Accounts Receivable
$
153,213
$
22,166
Less: Sales Returns and Allowances
37,570
28,707
Less: Doubtful Accounts
3,967
3,967
Accounts Receivable, net
$
111,676
$
(10,508
)
F-
37
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The Company determined that three customers
accounted for approximately 51% (or approximately 21%, 19%, and 11%), or an aggregate of $78,224, of the outstanding total accounts receivable
of $153,213 as of March 31, 2021. The Company determined that four customers accounted for approximately 76% (or approximately 26%, 22%,
14% and 14%), or an aggregate of $16,904, of the outstanding total accounts receivable of $22,166 as of December 31, 2020.
In the accompanying Consolidated Statements
of Loss for the three months ended March 31, 2021, one customer represented 12% of the Company's total net revenue of $462,408 for
the three months ended March 31, 2021. In the accompanying Consolidated Statements of Loss for the three months ended March 31, 2020,
no one customer represented 10% or more of the Company's total net revenue of $202,057 for the three months ended March 31, 2020.
The raw materials used in the production
of the Company's products are obtained by the Company's co-packers and consist primarily of materials such as the flavors,
caffeine, sugars or sucralose, taurine, vitamins, CBD, and hemp seed protein contained in its beverages, the bottles in which its beverages
are packaged, and the labeling on the outside of its beverages. These principal raw materials are subject to price and availability fluctuations.
The Company currently relies on a few key co-packers, which in turn rely on a few key suppliers. The Company continually endeavors to
have back-up co-packers, which co-packers would in turn depend on their third-party suppliers to supply certain of the flavors and concentrates
that are used in the Company's beverages. The Company is also dependent on these co-packers to negotiate arrangements with their
existing suppliers that would enable the Company to obtain access to certain of such concentrates or flavor formulas under certain extraordinary
circumstances. Additionally, in a limited number of cases, the Company's co-packers may have contractual restrictions with their
suppliers or the Company's co-packers may need to obtain regulatory approvals and licenses that may limit the co-packers'
ability to enter into agreements with alternative suppliers. Contractual restrictions in the agreements the Company has with certain distributors
may also limit the Company's ability to enter into agreements with alternative distributors. The Company believes that a satisfactory
supply of co-packers will continue to be available at competitive prices, although there can be no assurance in this regard. With respect
to Gold Leaf's operations, the Company continually endeavors to contract with additional beverage vendors to ensure the Company
has adequate inventory. The Company believes that a satisfactory supply of vendors will continue to be available at competitive prices,
although there can be no assurance in this regard.
The Company had certain vendors that individually
represented 10% or more of the Company's inventory purchases. For the three months ended March 31, 2021, the Company purchased 73%
of its inventory from five vendors for the three months ended March 31, 2021. Of these vendors, $21,988 is due to these vendors as of
the balance sheet dated March 31, 2021. For the year ended December 31, 2020, the Company did not purchase in excess of 10% of its inventory
from any single vendor.
NOTE 21 – SUBSEQUENT EVENTS
Management has evaluated
subsequent events through May 17, 2021, the date that the March 31, 2021 Consolidated Financial Statements were issued, and has determined
the following events have occurred that would warrant additional disclosure:
(1)
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, the Company's products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact the Company's business, financial condition, and cash flow.
F-
38
Kona Gold Beverage, Inc.
(formerly known as Kona Gold
Solutions, Inc.)
NOTES TO THE UNAUDITED CONSOLIDATED
FINANCIAL STATEMENTS
The extent of the effect of COVID-19 on the
Company's 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 the Company's business. However, as the pandemic continued for
much of the 2020 fiscal year and if it continues for a prolonged period in the 2021 fiscal year, it could have a continuing material adverse
effect on the Company's business, results of operations, financial condition, and cash flow and adversely impact the quoted price
of the Common Stock on the OTCM's OTCQB
®
Venture Market.
The extent to which the COVID-19 pandemic
will further impact the Company's 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, the Company cannot reasonably
estimate the impact to its business at this time.
(2)
On April 27, 2021, the Paycheck Protection Promissory Note, dated May 4, 2020, in the original principal amount of $95,161 (the "PPP Loan") with Wells Fargo Bank, N.A. was forgiven for the full amount. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the "PPP"), which was established as part of the Coronavirus Aid, Relief and Economic Security Act the ("CARES Act") and is administered by the U.S. Small Business Administration.
(3)
On May 5, 2021, the Company and the Selling Stockholder entered into a Limited Amendment Agreement, dated as of May 5, 2021, pursuant to which the parties agreed to a partial Second Closing of the transactions contemplated by the 2021 SPA, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture (the "Partial Second Convertible Debenture") in the face amount of $200,000 for a purchase price of $192,000.
(4)
On May 5, 2021, the Company issued an aggregate of 14,436,426 shares of Common Stock upon the conversion of $300,000 of the principal of, and $7,496 of accrued interest on, the Third 2020 Debenture. At the time of conversion, the VWAP during the previous 15 trading days was $0.0266. The Third 2020 Debenture was converted at the conversion price of $0.0213, which was the lower of the 2021 Fixed Conversion Price and the 2021 Market Conversion Price.
(5)
On April 4, 2021, the Company signed a Note Modification Amendment to a Standard Promissory Note Agreement with a related party originally dated January 15, 2019 for the principal sum of $20,000. The Note Modification Amendment extends the due date of the principal sum for one year, payable on April 4, 2022.
(6)
On April 4, 2021, the Company signed a Modification Amendment to a Line of Credit and Security Agreement with a related party originally dated April 4, 2019 for the principal sum up to $1,500,000 plus interest, fees and costs. The Modification Amendment extends the due date of the principal sum for one year, payable on April 4, 2022.
F-
39
INDEX TO FINANCIAL STATEMENTS
Financial Statements of S and S Beverage, Inc.
Unaudited Balance Sheet as of January 31, 2021 and audited balance sheet as of December 31, 2020
F-41
Unaudited Statements of Loss for the one month ended January 31, 2021 and 2020
F-42
Unaudited Statements of Stockholders' Deficit for the one month ended January 31, 2021 and 2020
F-43
Unaudited Statements of Cash Flows for the one month ended January 31, 2021 and 2020
F-44
Notes to the Consolidated Financial Statements
F-45
F-
40
S and S Beverage, Inc.
BALANCE SHEETS
January 31
December 31,
2021
2020
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
—
$
—
Accounts receivable, net of allowance of $24,280 and $0, respectively
9,438
9,438
Inventory
240,797
240,797
Total current assets
250,235
250,235
NON-CURRENT ASSETS
Property, plant and equipment, net
12,200
12,200
Total assets
$
262,435
$
262,435
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued liabilities
$
55,553
$
78,782
Outstanding checks
23,058
6,362
Interest payable
11,915
11,915
Due to customers
19,667
19,667
Current note payable - related party
811,761
801,761
Total current liabilities
921,954
918,487
NON-CURRENT LIABILITIES
Note payable – related party, net of current
—
—
Total liabilities
921,954
918,487
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common Stock, $30.05 par value, 10,000 shares issued and outstanding, respectively
300,500
300,500
Additional paid-in capital
437,701
437,701
Accumulated deficit
(1,397,720
)
(1,394,253
)
Total stockholders' deficit
(659,519
)
(656,052
)
Total liabilities and stockholders' deficit
$
262,435
$
262,435
The accompanying notes are an integral part of these
consolidated financial statements.
F-
41
S and S Beverage, Inc.
STATEMENTS OF LOSS
January 31,
2021
2020
REVENUES
$
572
$
11,520
COST OF REVENUES
1,130
36,605
Gross profit
(558
)
(25,085
)
OPERATING EXPENSES
Selling, general and administrative expenses
2,909
57,316
Income (Loss) from operations
(3,467
)
(82,401
)
Other income / (expense)
—
—
Net Income (Loss)
$
(3,467
)
$
(82,401
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic and diluted
10,000
10,000
NET LOSS PER COMMON SHARE:
Basic and diluted
$
(0.35
)
$
(8.24
)
The accompanying notes are an integral part of these
consolidated financial statements.
F-
42
S and S Beverage, Inc.
STATEMENTS OF STOCKHOLDERS' DEFICIT
Common Stock
$.00001 Par
Additional Paid-in
Accumulated
Total
Stockholders'
Shares
Amount
Capital
Deficit
Deficit
Balance December 31, 2019
10,000
$
300,500
$
412,701
$
(765,784
)
$
(52,583
)
One-month Net Income (Loss)
(82,401
)
(82,401
)
Balance January 31, 2020
10,000
$
300,500
$
412,701
$
(848,185
)
$
(134,984
)
Loan Forgiveness
25,000
25,000
11-month Net Income (loss)
(546,068
)
(546,068
)
Balance December 31, 2020
10,000
$
300,500
$
437,701
$
(1,394,253
)
$
(656,052
)
Net Income (loss)
(3,457
)
(3,467
)
Balance January 31, 2021
10,000
$
300,500
$
437,701
$
(1,397,720
)
$
(659,519
)
The accompanying notes are an integral part of these
consolidated financial statements.
F-
43
S and S Beverage, Inc.
STATEMENTS OF CASH FLOWS
For the One Month Ended
January 31,
2021
2020
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net Income
$
(3,467
)
$
(82,401
)
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
—
—
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable
—
16,024
)
Decrease (increase) in inventory
—
(18,757
)
Increase (decrease) in accounts payable
(23,229
)
15,830
Increase (decrease) in interest payable
—
—
Increase (decrease) in due to/from
—
(27,886
)
Net cash provided by (used in) operating activities
(26,696
)
(97,190
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment
—
—
Net cash provided by (used in) investing activities
—
—
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES:
Changes in note payable – related party
10,000
45,001
Net cash provided by (used in) financing activities
10,000
45,001
Net cash increase/(decrease) for period
(16,696
)
(52,189
)
Cash at beginning of period
(6,362
)
30,075
Cash at end of period
$
(23,058
)
$
(22,114
)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes
$
—
$
—
Cash paid for interest
$
—
$
—
The accompanying notes are an integral part of these
consolidated financial statements.
F-
44
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
S and S Beverage, Inc. (the "Company"),
a Wisconsin Corporation, owns and operates a line of superior lemonade products in four distinct flavors under the Lemin brand. The Company
is primarily focused on product development in the functional beverage sector.
Accounting Standards Codification subtopic
Segment Reporting 280-10 ("ASC 280-10") establishes standards for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments to be presented in interim financial reports issued to stockholders.
ASC 280-10 also establishes standards for related disclosures about products and services and geographic areas. Operating segments are
identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief
operating decision maker, or decision-making group, in making decisions how to allocate resources and assess performance. The information
disclosed herein materially represents all the financial information related to the Company's only material principal operating
segment.
The Company currently sells its products
through resellers, the Company website, and distributors that span across the United States. The Company's products are available
in wide variety of stores, including convenience and grocery stores, and gift shops.
Effects of COVID-19
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 the Company's consumer demand, sales, and financial performance will
depend on certain developments, including, among other things, the duration and spread of the outbreak and the impact on the Company's
consumers and employees, all of which are uncertain and cannot be predicted. Management is actively monitoring this situation and potential
impacts on our financial condition, liquidity, and results of operations.
NOTE 2 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
A.
Basic of presentation
The accompanying consolidated financial statements
are unaudited and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have
been eliminated in consolidation. These unaudited consolidated financial statements have been prepared on the accrual basis of accounting
and in accordance with generally accepted accounting principles ("GAAP") in the United States.
B.
Use of estimates
The preparation of the consolidated financial
statements in conformity with GAAP 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.
F-
45
C.
Cash and cash equivalents
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.
D.
Fair value of financial instruments
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:
Leve 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 can 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.
E.
Accounts receivable
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. No bad debt was recorded in the accompanying statement of income one month ending January
31, 2021 and 2020, respectively. Management will review annually to determine provisions and record an allowance as deemed necessary.
In the opinion of management, no provision is deemed necessary for sales returns and all accounts were deemed collectible at December
31, 2020. The balance of allowance for Uncollectible Accounts as of January 31, 2021 and December 31, 2020 is $24,280, respectively.
F.
Inventories
The Company's inventories are valued
at the lower cost or net realizable value. The Company's inventories consist almost entirely of finished goods and freight. 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 the balance sheets dated January 31, 2021 and December 31, 2020, all inventory
is current.
G.
Property, plant and equipment
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.
F-
46
Depreciation is provided using the straight-line
method over the estimated useful lives of the asset as follows:
Estimated useful lives (in years)
Furniture and fixtures
7
Machinery and equipment
7
Vehicles
5
Computer equipment
5 – 7
H.
Revenue recognition
We sell our Lemin
Superior Lemonade, now named OOH LA Lemin, through resellers and distributors. In evaluating the timing of the transfer of control of
products to our 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 distributors and resellers when products that
do not require further services by us are shipped, when there are no uncertainties surrounding product acceptance, and when collectability
is reasonably assured.
On January 1, 2019, the Company adopted ASU
No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
("ASC Topic 606"). The underlying principle of ASC Topic
606 is to recognize revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation
of Topic ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.
To apply these principles, Topic 606 outlines a five-step process:
1.
Identify the contract with a customer.
2.
Identify the separate performance obligations in the contract.
3.
Determine the transaction price.
4.
Allocate the transaction price to the separate performance obligations in
the contract.
5.
Recognize revenue when (or as) the entity satisfies a performance obligation
Pursuant to ASC Topic 606, the Company recognizes
revenue when performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control,
including the risks and rewards of ownership. With respect to the Company, performance is deemed to occur upon shipment or delivery of
products to its customers based on the written contract terms, which is also when control is transferred.
The Company evaluated
the guidance in ASC 606-10-50-5 and the related implementation guidance to determine if disaggregation of revenues that would be meaningful.
The Company's revenue is earned from its sale of Lemin Superior Lemonade, now named OOH LA Lemin, and is recognized when it satisfies
a single performance obligation by transferring control of its products to a customer. The Company does not have significant financing
component or payment terms, and it does not have any material unsatisfied performance obligations. The sales from the Company's
beverages are organized as one reportable segment.
I.
Cost of revenue
Cost of revenues
consists primarily of expenses associated with the delivery and distribution of products. 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 revenues. The costs are charged to cost of revenues in the same period that the associated revenue is earned.
F-
47
J.
Impairment of long-lived assets
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, 2020 and determined long-lived assets were not impaired.
K.
Income taxes
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 of the accompanying Consolidated Balance Sheets dated December 31, 2020 and December 31, 2019, respectively.
L.
Advertising costs
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 one month ended January 31, 2021 and 2020, were approximately $286 and $2,195,
respectively, which amounts were included in selling, general and administrative expenses in the accompanying Consolidated Statements
of Loss.
M.
Concentration of Credit Risk
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.
N.
Basic and diluted earnings per share
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.
F-
48
O.
Segments
ASC 280-10,
Segment Reporting
("ASC
280-10"), establishes standards for reporting information regarding operating segments in annual financial statements and requires
selected information for those segments to be presented in interim financial reports issued to stockholders. ASC 280-10 also establishes
standards for related disclosures about products and services and geographic areas. Operating segments are identified as components of
an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or
decision-making group, in making decisions how to allocate resources and assess performance. The Company identified one operating segment
that reports revenue, including both sales to external customers and intersegment sales or transfers, that are 10% or more of the combined
revenue, internal and external, of the Company's operating segment.
P.
Recently issued accounting pronouncements
The Company has evaluated all recently issued
accounting pronouncements, issued or proposed, by the FASB or other standards-setting bodies as of the period ending September 30, 2020.
The Company does not expect a material impact on the Company's financial position, result of operations, or cash flows from these
pronouncements.
NOTE 2 – INVENTORY
Inventory consisted of the following:
January 31, 2021
December 31,
2020
Lemin
$
234,885
$
234,885
Trays, Cans and Sleeves
5,912
5,912
Raw Materials
—
—
Total Inventory
$
240,797
$
240,797
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
January 31, 2021
December 31,
2020
Start-up Cost
$
11
$
11
Website Costs
14,500
14,500
Less: Accumulated Depreciation
(2,311
)
(2,311
)
Property, plant and equipment, net
$
12,200
$
12,200
Amortization expense for the one month ended January 31, 2021
and 2020 was $0, respectively.
NOTE 4– RELATED PARTY TRANSACTIONS
A.
Long-term debt consists of two note payables with a related party:
1)
Long-term debt consists of one 8% interest per annum note payable for $200,000 from a related party. Payments of $9,045 per month is due beginning October 17, 2018. On June 1, 2020, an additional $35,000 was received, and on January 14, 2021, an additional $10,000 was received on the same note, under new terms that the Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023.  In the accompanying balance sheets dated January 31, 2021 and December 31, 2020, the balance of the note payable is $123,761, and $113,761, respectively, and accrued interest was $11,776, respectively.
F-
49
2)
Long-term debt consists of one 8% interest per annum note payable for $612,700 from a related party on November 1, 2019. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023. On December 31, 2019, $412,700 has been forgiven in full by the related party. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $200,000, respectively.
3)
Long-term debt consists of one 2% interest per annum note payable for $300,000 from a related party on February 1, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date three (3) days after the sale of substantially all of the assets or equity. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $300,000, respectively, and accrued interest was $9.953, respectively.
4)
Long-term debt consists of one 0% interest per annum note payable for $200,000 from a related party on July 31, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date three (3) days after the sale of substantially all of the assets or equity. In the accompanying balance sheets dated January 31, 2021, and December 31, 2020, the balance of the note payable is $198,000, respectively, and accrued interest was $0, respectively.
5)
Long-term debt consists of one 8% interest per annum note payable for $25,000 from a related party on April 30, 2020. Note shall be payable in one (1) payment of principle plus interest at or before the maturity date of November 1, 2023. On November 30, 2020, this debt was forgiven. In the accompanying balance sheet dated January 31, 2021, and December 31, 2020, there is no balance due, respectively.
The future maturities
are as follows:
December 31, 2021 – December 31, 2022
$
—
November 1, 2023
798,261
$
798,261
NOTE 5 – EQUITY TRANSACTIONS
Common Stock
The Company has authorized 10,000 shares
of common stock with a par value of $30.50, of which 10,000 were issued and outstanding as of the one month ended January 31, 2021 and
the year ended December 31, 2020, respectively.
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50
Transactions
On January 21, 2021,
the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Kona Gold Beverage, Inc. ("Kona
Gold"), pursuant to which it acquired all of the capital stock of the Company. The parties to the Merger Agreement are (i) Kona
Gold, (ii) KGS Temporary Company, Inc., a wholly-owned subsidiary of Kona Gold ("Acquisition Subsidiary"), (iii) the Company,
(iv) William J. Stineman and K&L Beverage, LLC (as the indemnifying parties on behalf of the Company's shareholders), and (v)
Mr. Stineman (as representative of the Company's shareholders). As a result of the transactions contemplated by the Merger Agreement,
the Company merged with and into the Acquisition Subsidiary. The Company was the surviving entity and became Kona Gold's wholly-owned
subsidiary.
The Merger Agreement contains customary representations, warranties, covenants,
and agreements of the parties, including certain indemnification rights in favor of Kona Gold that are customary for a transaction of
that nature and magnitude.
The two individual members of K&L Beverage, LLC, agreed to guarantee its indemnification obligations.
To consummate the Acquisition, a Certificate of Merger was filed with the Wisconsin Department of Financial Institutions (the "Merger
Certificate") on February 1, 2021.
In consideration
of the transactions contemplated by the Merger Agreement, Kona Gold issued to the Company's shareholders an aggregate of nine million
restricted shares of its common stock (the "Acquisition Stock") on a pro rata basis. Kona Gold did not grant any registration
rights in respect of the shares of Acquisition Stock. Kona Gold also agreed to pay an aggregate of $1,050,000 (the "Aggregate Acquisition
Payments"), the majority of which is allocated to certain of the Company's creditors (including one of the Company's
legacy shareholders) and approximately $89,000 of which (the "Remaining Acquisition Payments") is allocated to the Company's
shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid by February 11, 2021. The balance of the Aggregate
Acquisition Payments, including the Remaining Acquisition Payments, are scheduled to be paid in monthly installments, in arrears on the
tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now
named OOH LA Lemin, that Kona Gold and the Company sells until the Aggregate Acquisition Payments have been paid in full. In addition
to the Aggregate Acquisition Payments, Kona Gold assumed and agreed to pay certain other liabilities of the Company as set forth in the
Merger Agreement.
NOTE 6 – COMMITMENTS AND CONTINGENCIES
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.
NOTE 7 – GOING CONCERN
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 Consolidated Financial Statements, during the one month ended January
31, 2021, the Company incurred a net loss of $3,467, used cash in operations of $26,696 and had a stockholders' deficit of $659,519
as of January 31, 2021. As reflected in the accompanying Consolidated Financial Statements, during the year ended December 31, 2020, the
Company incurred a net loss of $628,469, used cash in operations of $584,438 and had a stockholders' deficit of $656,052 as of December
31, 2020.
The Company attributes this loss to the Company
being impacted by the COVID-19 pandemic during the fiscal year 2020 and during the first month of fiscal year 2021. The COVID-19 delayed
the distribution of products during most of 2020 – drink line broadening items. In addition, the Company finalized its acquisition
in January 2021, and sales were reduced during this time. See Note 9,
Subsequent Events
.
F-
51
As a result, the Company's continuation
as a going concern is dependent on the ability to obtain additional financing until we can generate sufficient cash flow from operations
to meet our obligations. Were we not acquired, we would have continued to seek additional debt or equity financing to continue our operations.
There is no assurance that we will ever be profitable or that debt or equity financing would have been available to us in the amounts,
on terms, and at times deemed acceptable to us, if at all. Obtaining commercial loans, assuming those loans would have been available,
would have increased our liabilities and future cash commitments. If we were unable to obtain financing or be acquired in the amounts
and on terms deemed acceptable to us, we would have been unable to continue our business, as planned, and as a result might have been
required to scale back or cease operations for our business, the result of which would be that our stockholders would have lost some or
all of their investment. The accompanying Financial Statements do not include any adjustments that might be necessary if the Company were
unable to continue as a going concern.
NOTE 8 – CONCENTRATIONS
The Company has 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 one month ended January 31, 2021,
no customers individually represented 10% or more of the Company's total revenue, and four customers accounted for 100%, or $33,718,
of the outstanding accounts receivable, and the Company has recorded an allowance for uncollectible accounts of $24,280. The net accounts
receivable for the year ending December 31, 2020 is $9,438 in the accompanying balance sheet. For the year ended December 31, 2020, three
customers individually represented 77%, or approximately $255,300 of the Company's total revenue, and four customers accounted for
100%, or $33,718, of the outstanding accounts receivable, and the Company has recorded an allowance for uncollectible accounts of $24,280.
The net accounts receivable for the year ending December 31, 2020 is $9,438 in the accompanying balance sheet.
The Company had certain vendors that individually
represented 10% or more of the Company's inventory purchases, as follows:
For the one month ended January 31, 2021 balance sheet, the Company
did not purchase any inventory from any vendor.. For the year ended December 31, 2020 balance sheet, the Company purchased 100% of the
Company's inventory from three vendors, of which $4,365 amount was due to these vendors.
NOTE 9 – SUBSEQUENT EVENTS
Management has evaluated
subsequent events through May 17, 2021, the date which the January 31, 2021 Financial Statements were issued, and has determined the following
events have occurred that would warrant additional disclosure:
(1)
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, the Company's products. Uncertainties regarding the economic impact of COVID-19 are likely to result in sustained market turmoil, which could also negatively impact the Company's business, financial condition, and cash flow.
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52
The extent of the effect of COVID-19 on the
Company's 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 the Company's business. However, if the pandemic continues for
a prolonged period, it could have a material adverse effect on the Company's business, results of operations, financial condition,
and cash flow.
The extent to which the COVID-19 pandemic
will further impact the Company's 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, the Company cannot reasonably
estimate the impact to its business at this time.
(2)
On January 21, 2021, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Kona Gold Beverage, Inc. ("Kona Gold"), pursuant to which it acquired all of the capital stock of the Company. The parties to the Merger Agreement are (i) Kona Gold, (ii) KGS Temporary Company, Inc., a wholly-owned subsidiary of Kona Gold ("Acquisition Subsidiary"), (iii) the Company, (iv) William J. Stineman and K&L Beverage, LLC (as the indemnifying parties on behalf of the Company's shareholders), and (v) Mr. Stineman (as representative of the Company's shareholders). As a result of the transactions contemplated by the Merger Agreement, the Company merged with and into the Acquisition Subsidiary. The Company was the surviving entity and became Kona Gold's wholly-owned subsidiary.
The Merger Agreement contains customary representations, warranties, covenants, and agreements of the parties, including certain indemnification rights in favor of Kona Gold that are customary for a transaction of that nature and magnitude.
The two individual members of K&L Beverage, LLC, agreed to guarantee its indemnification obligations. To consummate the Acquisition, a Certificate of Merger was filed with the Wisconsin Department of Financial Institutions (the "Merger Certificate") on February 1, 2021.
In consideration of the transactions contemplated by the Merger Agreement, Kona Gold issued to the Company's shareholders an aggregate of nine million restricted shares of its common stock (the "Acquisition Stock") on a pro rata basis. Kona Gold did not grant any registration rights in respect of the shares of Acquisition Stock. Kona Gold also agreed to pay an aggregate of $1,050,000 (the "Aggregate Acquisition Payments"), the majority of which is allocated to certain of the Company's creditors (including one of the Company's legacy shareholders) and approximately $89,000 of which (the "Remaining Acquisition Payments") is allocated to the Company's shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid by February 11, 2021. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent to $2.00 per case of Lemin Superior Lemonade, now named OOH LA Lemin, that Kona Gold and the Company sells until the Aggregate Acquisition Payments have been paid in full. In addition to the Aggregate Acquisition Payments, Kona Gold assumed and agreed to pay certain other liabilities of the Company as set forth in the Merger Agreement.
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53
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
KONA GOLD BEVERAGE, INC.
For a description of our significant accounting policies
and an understanding of the significant factors that influenced our performance during the three months ended March 31, 2021, this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (hereafter referred to as "MD&A") should
be read in conjunction with the Unaudited consolidated financial statements, including the related notes, appearing in Part I, Item 1
of this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (the "2020
Form 10-K").
Note about Forward-Looking Statements
This Quarterly Report on Form 10-Q includes statements
that constitute "forward-looking statements." These forward-looking statements are often characterized by the terms "may,"
"believes," "projects," "intends," "plans," "expects," or "anticipates,"
and do not reflect historical facts.
Specific forward-looking statements contained in this
portion of the Quarterly Report include, but are not limited to: (i) statements that are based on current projections and expectations
about the markets in which we operate, (ii) statements about current projections and expectations of general economic conditions, (iii)
statements about specific industry projections and expectations of economic activity, (iv) statements relating to our future operations,
prospects, results, and performance, (v) statements about the Chapter 11 Case, (vi) statements that the cash on hand and additional cash
generated from operations together with potential sources of cash through issuance of debt or equity will provide the Company with sufficient
liquidity for the next 12 months, and (vii) statements that the outcome of pending legal proceedings will not have a material adverse
effect on business, financial position and results of operations, cash flow or liquidity.
Forward-looking statements involve risks, uncertainties
and other factors, which may cause our actual results, performance or achievements to be materially different from those expressed or
implied by such forward-looking statements. Factors and risks that could affect our results, future performance and capital requirements
and cause them to materially differ from those contained in the forward-looking statements include those identified in our 2020 Form 10-K
under Item 1A "Risk Factors", as well as other factors that we are currently unable to identify or quantify, but that may
exist in the future.
In addition, the foregoing factors may generally
affect our business, results of operations and financial position. Forward-looking statements speak only as of the date the statements
were made. We do not undertake and specifically decline any obligation to update any forward-looking statements. Any information contained
on our websites
www.konagoldbeverage.com
,
www.konagoldhemp.com
,
www.highdrateme.com
, and
www.goldleafdist.com
or any other websites referenced in this Quarterly Report are not part of this Quarterly Report.
54
The following discussion and analysis of the results
of operations and financial condition for the three months ended March 31, 2021 and March 31, 2020 should be read in conjunction with
the financial statements and related notes and the other financial information that are included. 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 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 to confirm forward-looking statements to actual results. Important factors on
which such statements are based are assumptions concerning uncertainties, including, but not limited to, uncertainties associated with
the following:
●
Inadequate capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
●
Our failure to earn revenues or profits;
●
Volatility or decline of our stock price;
●
Potential fluctuation in our financial results;
●
Rapid and significant changes in markets;
●
Litigation with or legal claims and allegations by outside parties;
●
Impacts from the COVID-19 pandemic; and
●
Insufficient revenues to cover operating costs.
The following discussion should be read in conjunction
with the financial statements and the notes thereto. 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.
55
Results of Operations
Overview
Our business has grown rapidly since inception, and
we anticipate that our business will continue to grow; however, in the year ended December 31, 2020, the Company saw unforeseen delays
in signing more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains and we were additionally
impacted by the COVID-19 pandemic during the fiscal year. The COVID-19 delayed the Company's launch of a variety of new products
during most of the 2020 fiscal year – drinks and non-drink line broadening items. Our Beverages Segment has three main revenue streams:
product sales from online consumers, product sales through resellers, and product sales from distributors. In the first quarter of fiscal
year 2021, we expanded our beverages segment with the acquisition of an additional beverage company, expanding our product line. Product
sales include sales of our energy drinks, HighDrate CBD-infused energy waters, lemon-flavored beverages and apparel such as t-shirts and
hats. In early 2019, we expanded our operations with the creation of a distribution center, which now functions as our Distribution Segment.
Our Distribution Segment has one main revenue stream: product sales to convenience stores, grocery stores, or smoke and gift shops, which
complement our current product offering. Product sales include sales of our beverages, as well as beverages and snacks purchased for resale
from several other beverage producers.
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. We expect that revenue will increase in fiscal year 2021 as distribution related to our current distributors affected by COVID-19
that have resumed distribution, will continue to see fewer impacts from the COVID-19 pandemic going forward. Despite the impact from COVID-19
on our revenues in the fiscal year 2020, we still anticipate to sign larger, more favorable agreements with larger, tier 1 and mid-size
distributors in our Beverages Segment during fiscal 2021.The following is a more detailed discussion of our financial condition and results
of operations for the period presented.
Three Months Ended March 31, 2021 compared to
the Three Months Ended March 31, 2020
Overview
As reflected in the accompanying financial statements,
during the three months ended March 31, 2021, we incurred a net loss of approximately $1.8 million and used cash in operations of approximately
$424,400, compared to a net loss of approximately $594,900 and used cash in operations of approximately $260,000 for the three months
ended March 31, 2020. As of March 31, 2021, we had a stockholders' deficit of approximately $4.1 million. The financial statements
of our newly acquired lemon-flavored beverages subsidiary are consolidated into the accompanying financial statements for the months of
February and March 2021.
The following is a more detailed discussion of our
financial condition and results of operations for the period presented, along with prior periods.
Revenue
The following table presents our net revenues, by
revenue source, and the period-over-period percentage change, for the period presented:
Three Months Ended March 31,
2021
2020
Revenue Source
Revenue
Revenue
% Change
Distributors
$
243,788
$
107,292
127
%
Amazon
38,502
27,358
41
%
Online Sales
18,204
11,189
63
%
Gold Leaf Distribution
180,217
54,836
229
%
Shipping
5,110
5,006
2
%
Sales Returns and Allowances
(23,413
)
(3,624
)
546
%
Net Revenues
$
462,408
$
202,057
129
%
56
The following table presents our net revenues, by
revenue source, as a percentage of total net revenues for the periods presented:
Three Months Ended March 31,
Revenues
2021
2020
Distributors and Resellers
53
%
53
%
Amazon
8
%
14
%
Online Sales
4
%
6
%
Gold Leaf Distribution
39
%
27
%
Shipping
1
%
2
%
Sales Returns and Allowances
(5
)%
(2
)%
During the three months ended March 31, 2021, we reported
net revenues of approximately $462,400, which is an increase of approximately $260,400, or approximately 129%, compared to net revenues
of approximately $202,100 for the three months ended March 31, 2020. An increase of approximately $130,200 was attributed to our Beverages
Segment, while our Distribution Segment reported an increase in net revenue of approximately $125,500. We attribute this increase in sales
to an effort to sign more favorable agreements with larger, reputable tier 1 and mid-size distributors and grocery chains. These contracts
saw unforeseen delays and were additionally impacted by the COVID-19 pandemic during the fiscal year. The COVID-19 delayed the Company's
launch of a variety of new products during most of the 2020 fiscal year – drinks and non-drink line broadening items. We expect
that revenue will increase in the last three quarters of the fiscal year 2021 as distribution related to our current distributors affected
by COVID-19 that have resumed distribution, will continue to see fewer impacts from the COVID-19 pandemic going forward. We anticipate
to sign larger, more favorable agreements with larger, tier 1 and mid-size distributors in our Beverages Segment during the remaining
three quarter of fiscal 2021.We also attribute this increase to the acquisition of a beverage company that broadened our drink product
line in our Beverages Segment. In addition, we have continued to add drink and non-drink line broadening products to our Distribution
Segment.
Cost of Revenues
Cost of revenues consists primarily of expenses associated
with products sold to distributors and resellers, including product and shipping costs. Costs also include credit card fees, fees incurred
for sales that occur on Amazon.com, and other transaction fees related to the processing of consumer transactions. Typically, we expect
that the cost of revenues will increase as a direct correlation to increases in sales. Thus, our cost of revenues increases on an absolute
basis versus on a percentage of sales basis. At the same time, when sales increase, thereby increasing our orders with our co-packers,
our cost of products decreases because of the volume discounts we receive from our co-packers.
During the three months ended March 31, 2021, we reported
cost of revenues of approximately $313,900, which is an increase of approximately $168,000, or approximately 115%, compared to approximately
$146,000 for the three months ended March 31, 2020. This increase is attributed to an increase in sales in both our Beverages Segment
and Distribution Segment in the first quarter of fiscal 2021, compared to the prior year period. The cost of sales increase was slightly
below the increase in sales. This is attributed to broadening our product line in both our Beverages Segment and our Distribution Segment
with drinks and non-drink products with higher consumer demand, and a reduction in cost for larger purchase quantities.
Selling, General and Administrative Expenses
SG&A expenses consist primarily of professional
fees, salaries and wages, advertising, rent, travel expenses, sponsorships, and general office and administrative expenses related to
maintaining our facilities.
57
SG&A expenses were approximately $569,000 for
the three months ended March 31, 2021, compared to approximately $647,200 million in the three months ended March 31, 2020, a decrease
of $78,200, or approximately 12%. The decrease in SG&A expenses was primarily due to a decrease in salaries and wages of 52% attributed
to our Beverages Segment; a decrease in legal and accounting fees of 21% attributed to our corporate-related activities; and a decrease
in advertising and promotion of 25% attributed to our Beverages Segment. This decrease was offset by a significant increase in professional
fees of 11,900% attributed to our corporate related activities; a significant increase in insurance of 285% attributed to both our Beverages
Segment and our Distribution Segment; an increase of 13% in rent expense attributed to both our Beverages Segment and our Distribution
Segment; and a 285% increase in OTCM fees attributed to corporate-related expenses.
Salaries and wages were approximately $212,000 in
the three months ended March 31, 2021, compared to approximately $443,000 for the three months ended March 31, 2020, a decrease of approximately
$231,000, which was attributed to our Beverages Segment. This decrease was the result of issuance of shares of the Company's common
stock made in the prior year to employees pursuant to their agreements. Legal and accounting fees were approximately $51,500 for the three
months ended March 31, 2021, a decrease of approximately $14,000, which was attributed to our corporate related activities. This decrease
was the result of audit related expenses in the prior year. Advertising and promotional fees were approximately $7,900 in the three months
ended March 31, 2021, compared to approximately $10,500 for the three months ended March 31, 2020, a decrease of approximately $2,600,
which was attributed to our Beverages Segment. This decrease was the result of slower sales during the first month of fiscal 2021 as distribution
related to our current distributors continued to be affected by COVID-19. Insurance expense was approximately $22,700 for the three months
ended March 31, 2021, compared to approximately $5,000 for the three months ended March 31, 2020, an increase of approximately $17,700.
This increase was attributed to both our Beverages Segment and our Distribution Segment and the result of signing larger, more favorable
agreements with larger, tier 1 and mid-size distributors and customers. Rent expenses were approximately $37,700 for the three months
ended March 31, 2021, compared to approximately $33,300 for the three months ended March 31, 2020, an increase of approximately $4,400.
This increase was attributed to both our Beverages Segment and our Distribution Segment and the result of our moving to a larger warehouse
facility that was necessary due to our anticipated growth. OTCM fees attributed to corporate-related expenses were approximately $26,200
for the three months ended March 31, 2021, compared to approximately $6,800 for the three months ended March 31, 2020, an increase of
approximately $19,400. This increase was the result of fees paid to the OTCM to have our Common Stock quoted on the OTCQB versus the OTC
Pink.
We expect that as we expand our business, operations,
and incur additional corporate-related expenses associated with having our Common Stock quoted on the OTCQB and being required to file
certain reports and other information with the SEC, SG&A expenses will increase for both our Beverages Segment and Distribution Segment.
We anticipate hiring additional personal in fiscal 2021 that are integral to the success of our growing Company.
Net Loss
We incurred a net loss of approximately $1.8 million
for the three months ended March 31, 2021, an increase of approximately $1.3 million compared to the previous year three months ending
March 31, 2020, which had a net loss of approximately $595,000 million. This net loss is primarily corporate-related expenses that are
necessary for our growth, which include interest expense related to the Warrant issued in connection with the Debentures and non-cash
expense on our derivative liability. The fair value of the Debentures will be re-measured each reporting period until the Debentures are
either converted or expire. In each reporting period during the term of the Debentures, the change in the fair value will either be recognized
as a non-cash expense or non-cash income. The change in the fair value of the Debentures is not impacted by our actual operations but
instead is strongly tied to the change in the market value of our Common Stock.
Segments – Three Months Ended March 31,
2021 and 2020
For the three months ended March 31, 2021 and 2020,
we had two reportable segments: (i) Beverages Segment and (ii) Distribution Segment. Amounts that are not allocated to either of these
reportable segments is reported in "Corporate and Eliminations." We evaluate performance and allocate resources based on
net revenue, cost of revenues, and gross profit. Information regarding the operations of these reportable segments is as follows:
58
Three Months Ended
Unaudited Segment Financial Data
March 31, 2021
March 31, 2020
Net revenue:
Beverages
$
310,093
$
179,927
Distribution
180,351
54,836
Corporate and Eliminations
(28,036
)
(32,706
)
Net revenue
$
462,408
$
202,057
Cost of Revenues:
Beverages
$
193,369
$
138,063
Distribution
128,750
40,610
Corporate and Eliminations
(8,199
)
(32,706
)
Cost of Revenues
$
313,920
$
145,967
Gross Profit:
Beverages
$
116,724
$
202,057
Distribution
51,601
145,967
Corporate and Eliminations
(19,837
)
—
Gross Profit
$
148,888
$
56,090
Liquidity and Capital Resources
Going Concern
We have incurred operating losses since inception
and have negative cash flow from operations since inception. As of March 31, 2021, we had a stockholders' deficit of approximately
$4.1 million and we incurred a net loss of approximately $1.8 million during the three months ended March 31, 2021. We also utilized cash
in operations of approximately $424,400 during the three months ended March 31, 2021. 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.
Lines of Credit
Since inception, we have financed our operations primarily
through internally generated funds, private sales of stock, accruals of compensation, and the use of our lines of credit. In summary,
our lines of credit are as follows:
59
Total Amount Available
Interest Rate
(per annum)
Outstanding Principal Balance
as of
March 31, 2021
Accrued Interest as of March 31, 2021
Kona Gold Line of Credit #1 – Related Party
$
1,500,000
3.75
%
$
1,372,651
$
48,757
Kona Gold Line of Credit #2
a
$
400,000
3.75
%
$
398,470
$
35,787
Gold Leaf Line of Credit – Related Party
$
200,000
3.75
%
$
125,500
$
4,706
a
This line of credit was provided by Matthew Nicoletti, an otherwise unaffiliated third party to whom we previously sold and issued certain shares of our Series B Preferred Stock (as then constituted) and Series C Preferred Stock (as then constituted), all of which have been converted into shares of our Common Stock and sold into the public market. Mr. Nicoletti is no longer the record or beneficial owner of any of our equity. There was no connection between our prior equity transactions with Mr. Nicoletti and our entry into this line of credit.
Notes Payable – Related Party
We had the following outstanding notes payable from
a related party during the three months ended March 31, 2021:
Note (1)
Issuance Date
Original Borrowing Amount
Interest Rate
Maturity Date
Largest Outstanding Balance since January 1,
2018
Outstanding Balance as of March 31, 2021
Long-term Loan – Kona Gold
October 31, 2018
$
20,000
0
%
April 4, 2022
$
20,000
$
7,000
Long-term Loan – Gold Leaf
February 19, 2019
$
70,000
0
%
March 15, 2022
$
70,000
$
58,000
(1)
Each of the notes payable was issued by us in favor of Robert Clark, our President, Chief Executive Officer, Secretary, and Chairman of our Board.
Note Receivable – Branded Legacy
On May 26, 2016, Robert Clark formed Elev8 Hemp, LLC,
a Delaware limited liability company ("Elev8 Hemp"), on behalf of Ryan Medico, our then-Chief Financial Officer. Mr. Medico
was the sole owner of and served as President of Elev8 Hemp.
In June 2016, we entered into a letter of intent with
Elev8 Hemp to acquire it, such that it would become our wholly-owned subsidiary. Pursuant to the letter of intent, on June 7, 2016, we
entered into an Acquisition Agreement with Elev8 Hemp (the "Elev8 Hemp Acquisition Agreement"), whereby we agreed to acquire
100% of the ownership of Elev8 Hemp and, in exchange, we agreed to issue to Mr. Medico five million restricted shares of our Common Stock,
which had a fair market value of $50,000. The Elev8 Hemp Acquisition Agreement provided that, if we failed to adequately capitalize the
development of Elev8 Hemp to complete its objectives set forth in its business plan, Mr. Medico would have the option until March 31,
2018 to repurchase Elev8 Hemp from us for a purchase price of $50,000, which could be paid in shares of our Common Stock.
On October 10, 2016, we entered into a Membership
Interest Purchase Agreement (the "Membership Interest Purchase Agreement") with 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. In connection with this transaction, Mr. Medico became the Chief Executive Officer and
sole director of Branded Legacy. The parties desired to enter into the Membership Interest Purchase Agreement because we did not have
adequate capital to fund the development of Elev8 Hemp's business, as well as our own. Until July 2018, Mr. Medico also continued
to serve as our Chief Financial Officer.
60
On April 14, 2017, our Board declared a dividend to
our stockholders of an aggregate of 53,196,608 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. On the record date, we had approximately 104
stockholders, all of whom received this dividend. After the payment of the dividend, we held 146,803,392 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 with Branded Legacy the remaining 146,803,392 shares of its common stock held by us for 2,746,723 shares of Branded Legacy's
Series D preferred stock. The shares of Series D preferred stock were initially convertible into 164,803,380 shares of Branded Legacy's
common stock.
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 Promissory Note in our favor in the original principal amount of $1,500,000 (the "Branded Legacy Note"). The
Branded Legacy Note is unsecured, non-convertible, and all principal and accrued and unpaid interest thereon is due and payable on November
27, 2029.
In more recent discussions with our independent registered
public accounting firm, we determined that the Branded Legacy Note should be classified as a note receivable on our balance sheets as
of March 31, 2021 and December 31, 2020, with a full reservation due to current doubts about collectability due to the dollar amount and
duration of the term of the Branded Legacy Note, rather than disclosing the note receivable as an "investment" but not recording
it on the balance sheets. Because of this re-classification, the Branded Legacy Note is no longer an off-balance sheet arrangement.
Paycheck Protection Promissory Note and Economic
Injury Disaster Loan
On May 4, 2020, we entered into a Paycheck Protection
Promissory Note in the original principal amount of $95,161 (the "PPP Loan") with Wells Fargo Bank, N.A. The PPP Loan was
made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the "PPP"), which was established
as part of the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and is administered by the U.S. Small Business
Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses
of the qualifying business. The current term of the PPP Loan is two years, with a maturity date of May 6, 2022 and it contains a favorable
fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan are deferred for the first six months of the term
of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly and may be prepaid by us at any time prior to
maturity with no prepayment penalties.
In January 2021, the Company
entered into a Paycheck Protection Promissory Note in the original principal amount of $117,487 (the "PPP Loan 2") with Wells
Fargo Bank, N.A. The PPP Loan was made under, and is subject to, the terms and conditions of the Paycheck Protection Program (the "PPP"),
which was established as part of the Coronavirus Aid, Relief and Economic Security Act the ("CARES Act") and is administered
by the U.S. Small Business Administration. The PPP provides for loans to qualifying businesses for amounts up to 2.5 times of the average
monthly payroll expenses of the qualifying business. The current term of the PPP Loan is five years, with a maturity date of January 2026
and it contains a favorable fixed annual interest rate of 1.00%. Payments of principal and interest on the PPP Loan are deferred for the
first six months of the term of the PPP Loan, or November 2020. Thereafter, principal and interest are payable monthly and may be prepaid
by us at any time prior to maturity with no prepayment penalties.
Under the terms of the CARES Act, recipients can apply
for and receive forgiveness for all, or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations,
based on the use of loan proceeds for certain permissible purposes as set forth in the PPP, including, but not limited to, payroll costs,
mortgage interest, rent or utility costs (collectively, "Qualifying Expenses"), and on the maintenance of employee and compensation
levels during a certain time period following the funding of the PPP Loan. The amount of loan forgiveness will be reduced if the borrower
terminates employees or reduces salaries during the eight-week period. We have used the proceeds of the PPP Loan for salaries and wages,
building lease expense, and utilities. However, no assurance is provided that we will be able to obtain forgiveness of the PPP Loan in
whole or in part.
61
In May 2020, we also received an advance in the amount
of $7,000 as part of the Economic Injury Disaster Loan program offered by the U.S. Small Business Administration. This advance was received
after we filed our application with regarding to the PPP. The advance was not included in any of the documentation related to the PPP
Loan. We are in the process of determining how this advance will be included as part of the PPP Loan forgiveness.
2020 Securities Purchase Agreement
In May 2020, the Company completed the 2020 Private
Placement of the 2020 Debentures and the 2020 Warrant pursuant to the 2020 SPA with an otherwise unaffiliated third-party investor (the
"Selling Stockholder"). The Company sold and issued the First 2020 Debenture and granted the 2020 Warrant promptly after entering
in the 2020 SPA. The Company sold and issued the Second 2020 Debenture promptly after filing the 2020 Registration Statement initially
with the SEC. The Company sold and issued the Third 2020 Debenture promptly after the SEC declared the Registration Statement effective.
The 2020 Debentures are due 12 months from their respective issuance dates and are secured by all of the Company's assets and the
assets of each of its subsidiaries pursuant to that certain Security Agreement by and among the Selling Stockholder, the Company's
subsidiaries, and the Company. Initially, the 2020 Debentures are convertible at the lower of (i) the fixed conversion price, which is
$0.05 per share, subject to adjustment (the "2020 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, subject to
adjustment (the "2020 Market Conversion Price"). The 2020 Debentures contain an adjustment provision that, subject to certain
exceptions, reduces the conversion price if the Company issues shares of its Common Stock or common stock equivalents at a price lower
than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations
and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of the 2020 Debentures.
The 2020 Debentures are subject to a "conversion blocker" such that the Selling Stockholder cannot convert any portion of
the 2020 Debentures that would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued and outstanding
shares of the Common Stock following such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable
upon conversion of the 2020 Debentures or exercise of the 2020 Warrant that had not then been converted or exercised, respectively). The
Selling Stockholder can increase that 4.99% "conversion blocker" to 9.99% upon at least 65 days' prior written notice
to the Company. The 2020 Debentures accrue interest at an annual rate equal to 8% and are due and payable on their respective maturity
dates (or sooner if the Selling Stockholder converts the 2020 Debentures or otherwise accelerates the maturity date, as provided for in
the 2020 Debentures). Interest is payable either in cash or, if certain Equity Conditions (as defined in the 2020 Debentures) are then
satisfied, in shares of the Common Stock at the 2020 Market Conversion Price on the trading day immediately prior to the date paid.
At the Company's option, it has the right to
redeem, in part or in whole, the outstanding principal and interest under the 2020 Debentures prior to their respective maturity dates;
provided
,
that
, as of the date of the holder's receipt of the redemption notice, (i) the VWAP of the Common Stock
is less than the 2020 Fixed Conversion Price, initially $0.05 per share, and (ii) there is no Equity Conditions failure. The Company 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"). The Company must provide the holder
15 business days' advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire
then to redeem plus the applicable Redemption Premium.
The 2020 Debentures contain an adjustment provision
that, subject to certain exceptions, reduces the conversion price if the Company issues shares of the Common Stock or common stock equivalents
at a price lower than the then-current conversion price of the 2020 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2020 Debentures.
62
Pursuant to the terms of the Registration Rights Agreement,
the Company agreed to file the Registration Statement with the SEC registering for resale the Conversion Shares and the Warrant Shares
within 45 calendar days following the closing of the 2020 Private Placement. The Company also agreed, among other things, to indemnify
the Selling Stockholder from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration
of the Conversion Shares and the Warrant Shares held by the Selling Stockholder.
Pursuant to the 2020 SPA, the purchase price for the
First 2020 Debenture was $250,000, less $15,000 for origination fees, which consisted of the "original issue discount" of
$10,000 and $5,000 as a structuring fee. On December 23, 2020, the Company converted $100,000 of the principal of, and $12,274 of accrued
interest on, the First 2020 Debenture into 8,255,438 shares of the Company's common stock. On January 25, 2021, the Company converted
$150,000 of the principal of, and $1,118 of accrued interest on, the First 2020 Debenture into 7,094,732 shares of the Company's
common stock, see Note 11,
equity transactions
. At March 31, 2021, no balance remains on any of the 2020 Debentures.
Pursuant to the 2020 SPA, the purchase price for the
Second 2020 Debenture was $250,000, less $10,000 for origination fees, which consisted of the "original issue discount" of
$10,000 fee. On January 25, 2021, the Company converted $100,000 of the principal of, and $10,410 of accrued interest on, the Second 2020
Debenture into 5,183,613 shares of the Company's common stock. On February 19, 2021, the Company converted $150,000 of the principal
of, and $855 of accrued interest on, the Second 2020 Debenture into 7,252,634 shares of the Company's common stock see Note 11,
equity transactions
. At March 31, 2021, no balance remains on any of the 2020 Debentures.
Pursuant to the 2020 SPA, the purchase price for the
Third 2020 Debenture was $500,000, less $10,000 for origination fees, which consisted of the "original issue discount" of
$10,000 fee. On January 12, 2021, the Company converted $200,000 of the principal of, and $1,425 of accrued interest on, the First 2020
Debenture into 10.887,819 shares of the Company's common stock, see Note 11,
equity transactions
. At March 31, 2021, the
principal balance of the Third 2020 Debenture is $300,000. As of the date of this Quarterly Report, no balance remains on any of the 2020
Debentures.
2021 Securities Purchase Agreement
In February 2021, the Company completed a private
placement transaction (the "2021 Private Placement") of two secured convertible debentures (the "2021 Debentures"),
convertible for up to 154,958,678 shares (the "2021 Conversion Shares") of Common Stock and granted a Warrant to purchase
Common Stock (the "2021 Warrant"), exercisable for up to 50,000,000 shares of Common Stock (the "2021 Warrant Shares"),
pursuant to that certain Securities Purchase Agreement between the Selling Stockholder and the Company, dated as of February 10, 2021
(the "2021 SPA"). The Company sold and issued the initial 2021 Debenture (the "First 2021 Debenture") and granted
the 2021 Warrant promptly after entering in the 2021 SPA. The Company will sell and issue the second 2021 Debenture (the "Second
2021 Debenture") promptly after the SEC declares effective the 2021 Registration Statement (as defined below). On May 5, 2021, the
Company and the Selling Stockholder entered into a Limited Amendment Agreement, pursuant to which the partis agreed to a partial Second
Closing, whereby the Selling Stockholder purchased a portion of the intended Second Convertible Debenture in the face amount of $200,000
for a purchase price of $192,000.
The 2021 Debentures are due 12 months from their respective
issuance dates and are secured by all of the Company's assets and the assets of each of its subsidiaries pursuant to that certain
Security Agreement by and among the Selling Stockholder, the Company's subsidiaries, and the Company. Initially, the 2021 Debentures
are convertible at the lower of (i) the fixed conversion price, which is $0.03 per share, subject to adjustment (the "2021 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, subject to adjustment (the "2021 Market Conversion Price").
The 2021 Debentures contain an adjustment provision that, subject to certain exceptions, reduces the conversion price if the Company issues
shares of its Common Stock or common stock equivalents at a price lower than the then-current conversion price of the 2021 Debentures.
Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events
will also result in an adjustment of the conversion price of the 2021 Debentures. The 2021 Debentures are subject to a "conversion
blocker" such that the Selling Stockholder cannot convert any portion of the 2021 Debentures that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such conversion (excluding,
for purposes of such determination, shares of the Common Stock issuable upon conversion of the 2021 Debentures or exercise of the 2021
Warrant that had not then been converted or exercised, respectively). The Selling Stockholder can increase that 4.99% "conversion
blocker" to 9.99% upon at least 65 days' prior written notice to the Company. The 2021 Debentures accrue interest at an annual
rate equal to 8% and are due and payable on their respective maturity dates (or sooner if the Selling Stockholder converts the 2021 Debentures
or otherwise accelerates the maturity date, as provided for in the 2021 Debentures). Interest is payable either in cash or, if certain
Equity Conditions (as defined in the 2021 Debentures) are then satisfied, in shares of the Common Stock at the 2021 Market Conversion
Price on the trading day immediately prior to the date paid.
63
At the Company's option, it has the right to
redeem, in part or in whole, the outstanding principal and interest under the 2021 Debentures prior to their respective maturity dates;
provided, that, as of the date of the holder's receipt of the redemption notice, (i) the VWAP of the Common Stock is less than the
2021 Fixed Conversion Price, initially $0.03 per share, and (ii) there is no Equity Conditions failure. The Company 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"). The Company must provide the holder 15 business
days' advance notice of its intent to make a redemption, setting forth the amount of principal and interest we desire then to redeem
plus the applicable Redemption Premium.
The 2021 Debentures contain an adjustment provision
that, subject to certain exceptions, reduces the conversion price if the Company issues shares of Common Stock or common stock equivalents
at a price lower than the then-current conversion price of the 2021 Debentures. Any stock splits, reverse stock splits, recapitalizations,
mergers, combinations and asset sales, stock dividends, and similar events will also result in an adjustment of the conversion price of
the 2021 Debentures.
Pursuant to the 2021 SPA, the purchase price for the
First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the "original issue discount" of
$36,000 and $5,000 as a structuring fee. Pursuant to the 2021 SPA, the purchase price for the Second 2021 Debenture will be $600,000,
less $24,000 as an "original issue discount."
In connection with the 2021 Private Placement, the
Company also granted the 2021 Warrant to purchase up to an aggregate of 50 million shares of the Common Stock. The 2021 Warrant has a
three-year term and is immediately exercisable at an exercise price of $0.03 per share, subject to adjustment. If the Company fails to
maintain an effective registration statement with the SEC covering the resale of the 2021 Warrant Shares, or if an Event of Default (as
defined below) has occurred and is continuing, then the holder may exercise the 2021 Warrant on a "cashless" basis. "Event
of Default" means an event of default under the 2021 SPA or the 2021 Debentures.
The 2021 Warrant contains an adjustment provision
that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common Stock or common stock equivalents
at a price lower than the then-current exercise price of the 2021 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 2021 Warrant.
The 2021 Warrant is subject to an "exercise
blocker" such that the Selling Stockholder cannot exercise any portion of the 2021 Warrant that would result in the Selling Stockholder
and its affiliates holding more than 4.99% of the then-issued and outstanding shares of the Common Stock following such exercise (excluding,
for purposes of such determination, shares of the Common Stock issuable upon exercise of the 2021 Warrant or conversion of the 2021 Debentures
that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99% "exercise blocker"
to 9.99% upon at least 65 days' prior written notice to the Company.
64
Pursuant to the terms of the 2021 Registration Rights
Agreement with the Selling Stockholder, the Company agreed to file a registration statement on Form S-1 (the "2021 Registration
Statement") with the SEC registering for resale the 2021 Conversion Shares and the 2021 Warrant Shares within 30 calendar days following
the closing of the 2021 Private Placement. The Selling Stockholder has agreed to waive this 30-calendar-day provision for so long as the
Company utilized its best efforts to file its Annual Report on Form 10-K for its fiscal year ended December 31, 2020, and promptly thereafter
files the 2021 Registration Statement. Further, the Company agreed to use its best efforts to have the 2021 Registration Statement declared
effective by the SEC as soon as practicable, but in no event later than the effectiveness deadline, or by the 5th trading day following
the date on which the Company is notified that the 2021 Registration Statement will not be reviewed or is no longer subject to further
review and comments. Pursuant to the 2021 Registration Rights Agreement, the Company is subject to partial liquidated damages equal to
2.0% of the aggregate purchase price paid by the holder pursuant to the 2021 SPA for either of the 2021 Debentures then held by the holder
for failure to file the 2021 Registration Statement timely, failure to file with the SEC a request for acceleration in accordance with
Rule 461 promulgated under the Securities Act, within five trading days after the date the Company is notified that the 2021 Registration
Statement will not be reviewed or is not subject to further review, the 2021 Registration Statement is not declared effective by the effectiveness
deadline, if after effectiveness, the 2021 Registration Statement ceases for any reason to remain continuously effective as required or
if the holders are not permitted to utilize the prospectus therein to resell for more than 30 consecutive calendar days or more than an
aggregate of 40 calendar days during any 12-month period, or if after the six-month anniversary of the 2021 Registration Rights Agreement,
the Company does not have available adequate current public information as set forth in Rule 144(c). The parties agreed that the maximum
aggregate liquidated damages payable to a holder of the 2021 Debentures under the 2021 Registration Rights Agreement is 24% of the aggregate
purchase price paid by such holder pursuant to the 2021 SPA. The Company also agreed, among other things, to indemnify the Selling Stockholder
from certain liabilities and to pay all fees and expenses incurred by the Company in connection with the registration of the 2021 Conversion
Shares and the 2021 Warrant Shares held by the Selling Stockholder.
Pursuant to the 2021 SPA, the purchase price for the
First 2021 Debenture was $900,000, less $41,000 for origination fees, which consisted of the "original issue discount" of
$36,000 and $5,000 as a structuring fee. At March 31, 2021, the principal balance of the First 2021 Debenture is $900,000.
Derivative Liability
The 2020 Debentures and the 2021 Debentures have been
accounted for utilizing ASC 815. The Company has incurred a liability for the estimated fair value of the 2020 Debentures. The estimated
fair value of the 2020 Debentures has been calculated using the Black-Scholes fair value option-pricing model with key input variables
provided by management, as of the date of issuance, with the valuation offset against additional paid in capital, and at each reporting
date, with changes in fair value recorded as gains or losses on revaluation in other income (expense). The Company identified embedded
features in the 2020 Debentures and the 2021 Debentures, which caused the 2020 Debentures and the 2021 Debentures to be classified as
a liability. These embedded features included the right for the holder to request for the Company to settle the amounts owed pursuant
to the 2020 Debentures and the 2021 Debentures to the holder by paying an amount of cash equal to the Black-Scholes value of the remaining
unexercised portion of the 2020 Debentures and the 2021 Debentures on the date of the consummation of a fundamental transaction. The accounting
treatment of derivative financial instruments requires that the Company treat the whole instrument as liability and record the fair value
of the instrument as a derivative as of the inception date of the instrument and to adjust the fair value of the instrument as of each
subsequent balance sheet date.
The derivative liabilities were valued using Black-Scholes
pricing model with the following average assumptions:
March 31, 2021
Stock Price
$
0.0327
Exercise Price
$
0.0276
Expected Life
1
Volatility
99.5
%
Dividend Yield
0
%
Risk-Free Interest Rate
.06
%
Fair Value
$
628,018
65
The following table summarizes the changes in the
Company's assets and liabilities measured at fair value as of March 31, 2021:
March 31, 2021
Quoted prices in Active Markets for Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs
(Level 3)
Convertible promissory notes with embedded conversion option
$
627,018
$
627,018
Total
$
627,018
$
627,018
The following table sets forth a summary of change
in fair value of the Company's derivative liabilities for the quarter ended March 31, 2021:
Fair value, January 1, 2020
$
—
Change in fair value of embedded conversion features of debenture included in earnings
—
Embedded conversion option liability recorded in connection with the issuance of 2020 debenture
148,628
Fair value, June 30, 2020
$
148,628
Change in fair value of embedded conversion features of debenture included in earnings
(39,725
)
Embedded conversion option liability recorded in connection with the issuance of 2020 debentures
108,903
Fair value, September 30, 2020
$
217,806
Change in fair value of embedded conversion features of debenture included in earnings
(69,051
)
Embedded conversion option liability recorded in connection with the issuance of 2020 debentures
212,397
Fair value, December 31, 2020
$
361,152
Change in fair value of embedded conversion features of debenture included in earnings
(202,443
)
Embedded conversion option liability recorded in connection with the issuance of 2021 debentures
468,309
Fair value, March 31, 2021
$
627,018
2020 Warrant and 2021 Warrant
The Company also granted the 2020 Warrant and the
2021 Warrant to purchase up to an aggregate of 20 million shares and 50 million shares of Common Stock, respectively. The 2020 Warrant
and the 2021 Warrant each has a three-year term and each is immediately exercisable at an exercise price of $0.05 per share for the 2020
Warrant and $0.03 per share for the 2021 Warrant, each subject to adjustment. If the Company fails to maintain an effective registration
statement with the SEC covering the resale of the 2020 Warrant Shares and the 2021 Warrant Shares, or if an Event of Default (as defined
below) has occurred and is continuing, then the holder may exercise, respectively, the 2020 Warrant and the 2021 Warrant on a "cashless"
basis. "Event of Default" means an event of default under the 2020 SPA and the 2021 SPA or the 2020 Debentures and the 2021
Debentures, respectively.
The 2020 Warrant and the 2021 Warrant, respectively,
contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if the Company issues shares of our Common
Stock or common stock equivalents at a price lower than the then-current exercise price of the 2020 Warrant and the 2021 Warrant, respectively.
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 2020 Warrant and the 2021 Warrant, respectively.
66
The 2020 Warrant and the 2021 Warrant, respectively,
is subject to an "exercise blocker" such that the Selling Stockholder cannot exercise any portion, respectively, of the 2020
Warrant that and the 2021 Warrant would result in the Selling Stockholder and its affiliates holding more than 4.99% of the then-issued
and outstanding shares of the Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common
Stock issuable, respectively, upon exercise of the 2020 Warrant and the 2021 Warrant or conversion of the 2020 Debentures and the 2021
Debentures, respectively, that had not then been exercised or converted, respectively). The Selling Stockholder can increase that 4.99%
"exercise blocker" to 9.99% upon at least 65 days' prior written notice to the Company.
During the year ended December 31, 2020, the Company
granted the 2020 Warrant that was immediately exercisable for up to 20,000,000 shares of Common Stock. During the three months ended March
31, 2021, the Company granted the 2021 Warrant that was immediately exercisable for up to 50,000,000 shares of Common Stock. The 2020
Warrant and the 2021 Warrant, respectively, was fully expensed as an interest expense related to the 2020 Warrant and the 2021 Warrant
issued in connection with the consummation of the transactions contemplated by the 2020 SPA and 2021 SPA, respectively, and no liability
was recorded as of March 31, 2021 and December 31, 2020, respectively.
Cash Flows
In summary, our use of cash has been as follows:
For the Three Months Ended March 31, 2021
Net cash used in operating activities
$
(424,389
)
Net cash used in investing activities
$
(1,306,156
)
Net cash provided by financing activities
$
1,673,578
Operating Activities
Cash provided by or used in operating activities primarily
consists of net income adjusted for certain non-cash items, including depreciation, amortization, stock-based payments, interest expense
related to the Warrants issued in the two private placements, and the effect of changes in working capital and other activities. Cash
used in operating activities for the three months ended March 31, 2021 was approximately $424,400 and consisted of a net loss of approximately
$1.8 million, adjustments for non-cash items, including adjustments related to the issuance of shares of our Common Stock for an acquisition,
interest expense related to the two warrant, and depreciation of approximately $1.3 million, and approximately $61,800 provided by working
capital and other activities.
Investing Activities
Cash used in investing activities for the three months
ended March 31, 2021 was approximately $1.3 million and was attributable to capital expenditures of approximately, $30,200, and goodwill
of approximately $1.28 million, which was attributed to the S and S acquisition.
Financing Activities
Cash provided by financing activities for three months
ended March 31, 2021 was approximately $1.7 million and was due to proceeds from lines of credit of approximately $3,000, proceeds from
convertible debt of approximately $913,800 million, proceeds from a note payable for the S and S acquisition, proceeds from the PPP Loan
of approximately $117,500, and $3,000 was used to pay principal on a note payable.
Non-Cash Investing and Financing Activities
For the three months ended March 31, 2021, there were
no non-cash investing and financing activities.
67
Off-Balance Sheet Arrangements
At March 31, 2021, we had no off-balance sheet arrangements,
commitments, or guarantees that require additional disclosure or measurement.
Critical Accounting Policies
Our discussion and analysis of results of operations
and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of our consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable,
inventories, valuation of intangible assets, and contingencies and litigation. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
The accounting policies that we follow are set forth
in Note 2,
Summary of Significant Accounting Policies
, of our consolidated financial statements for the three months ended March
31, 2021. 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.
Leases
On January 1, 2019, we adopted the Financial Accounting
Standards Board's ("FASB") Accounting Standards Update 2016-02,
Leases (Topic 842)
("ASC Topic 842"),
which requires an entity to recognize a liability and corresponding asset for leases that meet certain criteria. We applied ASC Topic
842 using the modified retrospective approach. Under this approach, we applied the new standards to all new leases, and leases which have
remaining obligations for financial statements issued for fiscal years beginning after December 15, 2018. We elected the package of practical
expedients permitted under the transition guidance, which allowed us to carryforward historical lease classification, and not reassess
(i) whether a contract was or contained a lease, and (ii) initial direct costs for any leases that existed prior to January 1, 2019. Under
this method, we did not restate comparative periods in our financial statements. 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 15,
Lease Liabilities,
to
our consolidated financial statements for the three months ended March 31, 2021 for additional information related to our right-of-use
assets and lease liabilities.
68
Revenue Recognition and Deferred Revenue
We sell our products, which
includes our hemp energy drink, CBD energy water, CBD water, lemon-flavored beverages, and logo apparel, to online customers or through
resellers and distributors. In evaluating the timing of the transfer of control of products to customers, we consider several indicators,
including significant risks and rewards of products, our right to payment, and the legal title of the products. We recognize revenue from
product sales to customers, distributors, and resellers when products that do not require further services by us are shipped, when there
are no uncertainties surrounding customer acceptance, and when collectability is reasonably assured. Sales are made to customers under
terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling, represent
revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of products
sold.
We also sell our products, and beverages purchased
for resale from several other beverage manufacturers to convenience stores, grocery stores, and smoke and gift shops. In evaluating the
timing of the transfer of control of products to customers, we consider several indicators, including significant risks and rewards of
products, our right to payment, and the legal title of the products. We recognize revenue from product sales to resellers when products
that do not require further services by us are shipped or delivered, when there are no uncertainties surrounding customer acceptance and
when collectability is reasonably assured. Cash received by us prior to shipment is recorded as deferred revenue. Sales are made to customers
under terms allowing certain limited rights of return. Amounts billed to customers in sales transactions related to shipping and handling,
represent revenues earned for the goods provided and are included in net sales. Costs of shipping and handling are included in cost of
products sold.
On January 1, 2019, we adopted ASU No. 2014-09,
Revenue
from Contracts with Customers (Topic 606)
("ASC Topic 606"). The underlying principle of ASC Topic 606 is to recognize
revenue to depict the transfer of goods or services to a customer at the amount expected to be collected. The implementation of Topic
ASC 606 had no impact on the prior period financial statements and no cumulative effect adjustment was recognized.
To apply these principles, ASC Topic 606 outlines
a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:
1.
Identifying the contract(s) or agreement(s) with a customer;
2.
Identifying the separate performance obligations in the contract or agreement;
3.
Determining the transaction price;
4.
Allocating the transaction price to the separate performance obligations in the contract or agreement; and
5.
Recognizing revenue as each performance obligation is satisfied.
Pursuant to ASC Topic 606, we recognize revenue when
performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control, including the
risks and rewards of ownership. With respect to us, performance is deemed to occur upon shipment or delivery of products to our customers
based on the written contract terms, which is also when control is transferred.
We evaluated the guidance in ASC 606-10-50-5 and the
related implementation guidance to determine disaggregation of revenues that would be meaningful. The majority of our revenue earned from
our Beverages Segment and our Distribution Segment is recognized when we satisfy a single performance obligation by transferring control
of our products to a customer. We do not have significant financing components or payment terms, and we do not have any material unsatisfied
performance obligations. Our revenues are obtained in similar geographical locations within the United States. Furthermore, the operations
in each of our reporting segments are expected to have essentially the same future prospects, similar gross margins, sales trends, and
the nature of our products and customers are essentially the same. The sales from our beverage product types are organized as one reportable
segment, which we refer to as the Beverages Segment, and the sales of our products and products that are purchased from resellers that
are distributed by Gold Leaf is organized as our second reportable segment, which we refer to as the Distribution Segment. We have also
determined that disaggregated revenue by net sales by revenue source would be meaningful and allow investors to understand our business
activities, historical performance, or future prospects. Disaggregated sales by revenue source, which includes sales to distributors,
online sales, sales through Amazon, and Gold Leaf distribution sales. This is the same information used by our Chief Operating Decision
Maker for evaluating the financial performance of our operations and making resource decisions. We also sell merchandise and apparel that
comprises approximately 1% of our gross annual sales, and solely exists to promote our beverages. Therefore, our merchandise and apparel
products are not a reportable segment. Merchandise and apparel sales are included with the gross sales for our Beverages Segment.
69
Accounts Receivable and Allowance for Doubtful Account Receivable
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.
Inventory
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 inventory consists almost entirely of finished and unfinished goods, and freight, which include CBD energy waters, CBD waters,
hemp energy drinks, lemon-flavored beverages, 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, 2021, we had approximately $861,700 of product in inventory, which was an increase of approximately
$201,200, compared to approximately $660,500 at December 31, 2020. 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 March 31, 2021, for an additional description of our inventory that had a
material effect on our consolidated financial statements.
Goodwill and Intangible Assets
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 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. We have
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. We have selected December
31 as the date to perform the annual impairment test. See Note 2,
Summary of Significant Accounting Policies, Subsection H, Goodwill
and Intangible Assets,
of our consolidated financial statements for the three months ended March 31, 2021, for an additional description
of intangible assets that had a material effect on our consolidated financial statements.
Stock-Based Compensation
FASB's ASC Topic 718, Stock Compensation (formerly,
FASB Statement 123R), prescribes accounting and reporting standards for all stock-based payment transactions in which employee and non-employee
services are acquired. We measure the cost of employee and non-employee services received in exchange for an award of equity instruments
based on the grant-date fair value of the award. Fair value for restricted stock awards is valued using the closing price of our Common
Stock on the date of grant. For our three months ended March 31, 2021, and 2020, we recognized stock-based compensation expense of approximately
$270,900, and $318,500, respectively. We had a balance in accrued stock-based compensation at March 31, 2021 and December 31, 2020 of
approximately $1.4 million, respectively. See Note 6,
Stock-Based Compensation,
of our consolidated financial statements for the
three months ended March 31, 2021 for an additional description of our stock-based compensation that had a material effect on our consolidated
financial statements.
70
Related Party Transactions
See Note 8,
Related Party Transactions,
to
our consolidated financial statements for the three months ended March 31, 2021 for an additional description of related party transactions
that had a material effect on our consolidated financial statements.
S and S Acquisition
On January 21, 2021, we entered
into an Agreement and Plan of Merger with S and S Beverage, Inc. and its shareholders, pursuant to which we acquired S and S and its line
of lemon-flavored beverages (the "S and S Acquisition"). To consummate the S and S Acquisition, we filed a Certificate of
Merger with the Wisconsin Department of Financial Institutions on February 1, 2021. In consideration with the S and S Acquisition, we
agreed to pay an aggregate of $1,050,000 (the "Aggregate Acquisition Payments"), the majority of which is allocated to certain
creditors of S and S (including one of its shareholders) and approximately $89,000 of which (the "Remaining Acquisition Payments")
is allocated to its shareholders on a pro rata basis. $400,000 of the Aggregate Acquisition Payments were paid within two weeks of the
closing of the transaction. The balance of the Aggregate Acquisition Payments, including the Remaining Acquisition Payments, are scheduled
to be paid in monthly installments, in arrears on the tenth calendar day of each month, commencing on March 10, 2021, at a rate equivalent
to $2.00 per case of OOH LA Lemin (the product line of S and S) that we sell until the Aggregate Acquisition Payments have been paid in
full. In addition to the Aggregate Acquisition Payments, we also assumed and agreed to pay certain other liabilities of S and S as set
forth in the Merger Agreement.
Emerging Growth Company Status
On April 5, 2012, the JOBS Act, was enacted. The JOBS
Act provides that, among other things, an "emerging growth company" can take advantage of an extended transition period for
complying with new or revised accounting standards. This provision allows an emerging growth company to delay the adoption of some accounting
standards until those standards would otherwise apply to private companies. As an emerging growth company, we have irrevocably elected
to take "opt out" of taking advantage of the extended transition period afforded by the JOBS Act for the implementation of
new or revised accounting standards and, as a result, we will comply with new or revised accounting standards on the relevant dates on
which adoption of such standards is required for non-emerging growth public companies on a case-by-case basis.
We intend to rely on certain of the other exemptions
and reduced reporting requirements provided by the JOBS Act. As an emerging growth company, we are not required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b),
and (ii) comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements (auditor
discussion and analysis).
We will remain an emerging growth company until the
earlier to occur of (1) the last day of our fiscal year (a) following the fifth anniversary of the declaration of effectiveness of our
Registration Statement on Form S-1 (December 31, 2020), (b) in which we have total annual gross revenues of at least $1.07 billion, or
(c) in which we are deemed to be a "large accelerated filer" under the rules of the SEC, which means the market value of our
common shares that is held by non-affiliates exceeds $700 million as of the last day of our second quarter, and (2) the date on which
we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.
We are also a "smaller reporting company"
meaning that the market value of our stock held by non-affiliates plus the proposed aggregate amount of gross proceeds to us as a result
of this offering is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal
year. We may continue to be a smaller reporting company after this offering if either (i) the market value of our stock held by non-affiliates
is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the
market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease
to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller
reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited
financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced
disclosure obligations regarding executive compensation.
Recently Issued Accounting Pronouncements
See Note 2,
Summary of Significant Accounting
Policies, Subsection S, Recently Issued Accounting Pronouncements,
to our consolidated financial statements for the three months
ended March 31, 2021 for a discussion of recent accounting pronouncements.
71
S AND S BEVERAGE, INC.
The following discussion and analysis of the results
of operations and financial condition for the one month January 31, 2021 and should be read in conjunction with the financial statements
and related notes and the other financial information that are included elsewhere herein. This discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations, and intentions. Forward-looking
statements are statements not based on historical information and which relate to future operations, strategies, financial results, or
other developments. Forward-looking statements are based upon estimates, forecasts, and assumptions that are inherently subject to significant
business, economic, and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual
results to differ materially from those expressed in any forward-looking statements made by us, or on our behalf. We disclaim any obligation
to update forward-looking statements. Actual results and the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those set forth under the "Risk Factors," "Cautionary
Note Regarding Forward-Looking Statements," and "Description of Business" sections herein. 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 herein. 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 to confirm forward-looking statements to actual results. Important factors on which such statements
are based are assumptions concerning uncertainties, including, but not limited to, uncertainties associated with the following:
●
Inadequate
    capital and barriers to raising the additional capital or to obtaining the financing needed to implement our business plans;
●
Our
    failure to earn revenues or profits;
●
Potential
    fluctuation in our financial results;
●
Rapid
    and significant changes in markets;
●
Litigation
    with or legal claims and allegations by outside parties;
●
Impacts
    from the COVID-19 pandemic; and
●
Insufficient
    revenues to cover operating costs.
The following discussion should be read in conjunction
with the financial statements and the notes thereto which are included herein. 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.
72
Results of Operations
One Month Ended January 31, 2021 compared to
the One Month Ended January 31, 2020
Overview
We sell our Lemin Superior Lemonade, now named OOH
LA Lemin. Our business was formed in 2018 and net revenues increased from $278,000 in our initial year of operations to approximately
$865,000 in fiscal year 2019, our first full year of operations. The COVID-19 pandemic resulted in reduced net revenues for our 2020 fiscal
year. For the first month ended January 31, 2021, we had net revenues of approximately $600, a decrease of approximately $10,500 from
the previous one month ended January 31, 2020. This decrease was anticipated, and we anticipate that growth in our business will restart
in the last eleven months of 2021 as the effects of the pandemic begin to recede and by virtue of our acquisition by Kona Gold Beverage,
Inc. ("Kona Gold").
Our decrease in revenue is primarily due to the effects
of the COVID-19 pandemic, and a halt in operations as a result of finalizing our acquisition by Kona Gold. The following is a more detailed
discussion of our financial condition and results of operations for the period presented.
Revenue
The decrease in our net revenues from our one month
ended January 31, 2020 to our January 31, 2021 fiscal year resulted primarily from a decrease in operations in during our acquisition
by Kona Gold.
Cost of Revenue
Cost of revenue consists primarily of expenses associated
with the products sold to distributors and resellers and consumers, including product and shipping costs. Typically, we expect that the
cost of revenue will increase overall as a direct correlation to increases in sales. However, due to the decrease in sales, we had a correlating
decrease in the cost of revenue.
Cost of revenue for our one month ended January 31,
2021 was approximately $1,100 (or 198% of net revenue), which was a decrease of approximately $35,500, or 97%, compared to our one month
ended January 31, 2020, in which cost of revenue was approximately $36,600 (or 318% of net revenues). This decrease is directly related
to the decrease in net revenues. The high percentage of net revenue is primarily the result of fees charged to the Company for product
space, or slotting fees, by our customers.
We expect cost of revenue as a percentage of net revenues
to rebound, if not to improve by virtue of the expected receding effects of the COVID-19 pandemic and our acquisition by Kona Gold.
Selling, General and Administrative Expenses
SG&A expenses consist primarily of professional
fees, salaries and wages, advertising, travel expenses, and general office and administrative expenses related to maintaining our operations.
SG&A expenses decreased by approximately $54,400
to approximately $2,900 in our one month ended January 31, 2021, from approximately $57,300 in our one month ended January 31, 2020. The
decrease in SG&A expenses was primarily due to a decrease in all expenses in preparation for our acquisition by Kona Gold.
Net Loss
We incurred a net loss of approximately $3,500 in
our one month ended January 31, 2021, a decrease of $78,900, as compared to a net loss of approximately $82,400 in our one month ended
January 31, 2020. This decrease in net loss is primarily due to the decrease in SG&A expenses more than offsetting the decrease in
gross profit. We expect that both gross profit and SG&A expenses will increase on a going forward basis by virtue of the expected
receding effects of the COVID-19 pandemic and our acquisition by Kona Gold.
Going Concern
We have incurred operating losses since inception
and have negative cash flow from operations since inception. As of January 31, 2021, we had a stockholders' deficit of approximately
$659,500 and we incurred a net loss of approximately $3,500 during the one month ended January 31, 2021. We also utilized cash in operations
of approximately $26,700 during the one month ended January 31, 2021. 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 believe
that our acquisition by Kona Gold will provide sufficient financing to continue our operations.
Our 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.
There is no assurance that we will ever be profitable
or that our acquisition by Kona Gold will provide sufficient financing to sustain and increase our operations in accordance with our business
plan. The 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.
73
Notes Payable – Related Party
We had the following outstanding notes payable from
a related party during the one month ended January 31, 2021:
●
Initial principal balance of $200,000 and 8% interest per annum (incurred in 2018 fiscal year). At January 31, 2021, the principal balance was $113,761.
●
Initial principal balance of $612,700 and 8% interest per annum (incurred in 2019 fiscal year). At January 31, 2021, the principal balance was $200,000.
●
Initial principal balance of $300,000 and 2% interest per annum (incurred in 2020 fiscal year). At January 31, 2021, the principal balance was $300,000.
●
Initial principal balance of $200,000 and 0% interest per annum (incurred in 2020 fiscal year). At January 31, 2021, the principal balance was $198,000.
The future maturities of the related parties'
notes payable are as follows:
December 31, 2021 – December 31, 2022
$
—
November 1, 2023
811,761
$
811,761
In connection with the acquisition of the Company
by Kona Gold, all outstanding notes payable are being repaid in accordance with the schedule set forth in the acquisition agreement.
Cash Flows
In summary, our use of cash has been as follows:
For the One Month Ended January 31, 2021
Net cash used in operating activities
$
(26,696
)
Net cash used in investing activities
$
0
Net cash provided by financing activities
$
10,000
Operating Activities
Cash provided by or used in operating activities for
the one month ended January 31, 2021 was approximately $26,700, which consisted of the net amounts of cash provided by or used in accounts
receivable, inventory, accounts payable, interest payable, and customer payments.
Investing Activities
We did not have any cash provided by or used in investing
activities for the one month ended January 31, 2021.
Financing Activities
Cash provided by financing activities for the one
month ended January 3, 2021 was approximately $10,000, all of which was due to notes payable from a related party.
Non-Cash Investing and Financing Activities
For the month ended January 31, 2021, there were no
non-cash investing and financing activities.
74
Off-Balance Sheet Arrangements
At January 31, 2021, we had no off-balance sheet
arrangements, commitments, or guarantees that require additional disclosure or measurement.
Critical Accounting Policies
Our discussion and analysis of results of operations
and financial condition are based upon our financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities.
We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories,
valuation of intangible assets, and contingencies and litigation. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.
The accounting policies that we follow are set forth
in Note 2,
Summary of Significant Accounting Policies
, of our financial statements for the one month ended January 31, 2021, as
included in our financial statements. These accounting policies conform to accounting principles generally accepted in the United States,
and have been consistently applied in the preparation of the financial statements.
Revenue Recognition
We sell our Lemin Superior
Lemonade, now named OOH LA Lemin, through resellers and distributors. In evaluating the timing of the transfer of control of products
to our 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 distributors and resellers when products that do not require
further services by us are shipped, when there are no uncertainties surrounding product acceptance, and when collectability is reasonably
assured.
On January 1, 2019, we adopted ASU No. 2014-09,
Revenue from Contracts
with Customers (Topic 606)
("ASC Topic 606"). The underlying principle of ASC Topic 606 is to recognize revenue to depict
the transfer of goods or services to a customer at the amount expected to be collected. The implementation of Topic ASC 606 had no impact
on the prior period financial statements and no cumulative effect adjustment was recognized.
To apply these principles, ASC Topic 606 outlines
a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes:
1.
Identifying
    the contract(s) or agreement(s) with a customer;
2.
Identifying
    the separate performance obligations in the contract or agreement;
3.
Determining
    the transaction price;
4.
Allocating
    the transaction price to the separate performance obligations in the contract or agreement; and
5.
Recognizing
    revenue as each performance obligation is satisfied.
Pursuant to ASC Topic 606, we recognize revenue when
performance obligations under the terms of a contract are satisfied, which occurs typically upon the transfer of control, including the
risks and rewards of ownership. With respect to us, performance is deemed to occur upon shipment or delivery of products to our customers
based on the written contract terms, which is also when control is transferred.
We evaluated the guidance in ASC 606-10-50-5 and the
related implementation guidance to determine if disaggregation of revenues that would be meaningful. Our revenue is earned from our sale
of Lemin Superior Lemonade, now named OOH LA Lemin, and is recognized when it satisfies a single performance obligation by transferring
control of its products to a customer. We do not have significant financing components or payment terms, and we do not have any material
unsatisfied performance obligations. Our revenues are obtained in similar geographical locations within the United States. The sales from
our beverages are organized as one reportable segment.
75
Accounts Receivable and Allowance for Doubtful Account Receivable
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. No bad
debt was recorded in the accompanying statements of income for one month ended January 31, 2021 and 2020, respectively. Management will
review annually to determine provisions and record an allowance as deemed necessary. In the opinion of management, a provision is deemed
necessary for allowances for the one month ended January 31, 2021 and year ended December 31, 2020. The balance of allowance for Uncollectible
Accounts as of January 31, 2021 and December 31, 2020 is $24,280, respectively.
Inventory
Our inventory is valued at the lower cost or net realizable
value. At the end of one month ended January 31, 2021, our inventory consisted almost entirely of finished goods and raw materials (approximately
$240,800), which was no increase from inventory at the end of the prior year ended December 31, 2020. The no change in inventory is primarily
due to the decrease in operations for our acquisition by Kona Gold. We periodically evaluate and adjust inventories for obsolescence.
In the opinion of management, no provision for obsolescence is deemed necessary. As of the balance sheet dated January 31, 2021 and December
31, 2020, all inventory is current.
Related Party Transactions
See Note 4,
Related Party Transactions,
to
our financial statements for the one month ended March 31, 2021 for an additional description of related party transactions that had a
material effect on our financial statements.
Recently Issued Accounting Pronouncements
See Note 2,
Summary of Significant Accounting
Policies, Subsection P, Recently Issued Accounting Pronouncements,
to our financial statements for the one month ended January 31,
2021 included in our financial statements for a discussion of recent accounting pronouncements.
76
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
As a Smaller Reporting Company, we are not required
to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure control and Procedures
.
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer
and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of March
31, 2021, the period covered in this Report, our disclosure controls and procedures
were not effective
to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
.
There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2021, that have
materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls
and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal
control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control
issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that
judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented
by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any
system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness
to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in
the degree of compliance with policies or procedures.
77
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings
We know of no other material pending legal proceedings
to which we or any of our subsidiaries is a party or to which any of our assets or properties, or the assets or properties of any of our
subsidiaries, are subject and, to the best of our knowledge, no adverse legal activity is anticipated or threatened. In addition, we do
not know of any such proceedings contemplated by any governmental authorities.
We know of no material proceedings in which any of
our directors, officers, or affiliates, or any registered or beneficial stockholder is a party adverse to us or any of our subsidiaries
or has a material interest adverse to us or any of our subsidiaries.
ITEM 1A. Risk Factors
We are a smaller reporting
company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. Unregistered Sales of Equity Securities
and Use of Funds
Pursuant to the Agreement
and Plan of Merger with S and S Beverage, Inc., we issued 9,000,000 shares of our common stock to the five legacy S and S shareholders.
The per-share fair market value of the common stock was $0.0301, based on the closing price of the Company's common stock, as reported
by OTC Markets Group Inc. on February 5, 2021, the date on which we filed our Current Report on Form 8-K disclosing the acquisition.
We issued those 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 did not involve any public offering).
ITEM 3. Defaults Upon Senior Securities
None.
ITEM 4. Mine Safety Disclosures
None.
ITEM 5. Other Information
None.
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ITEM 6. Exhibits
The following exhibits are filed with or incorporated
by reference into this Quarterly Report.
2.1
Agreement and Plan of Merger among Kona Gold Beverage Inc., KGS Temporary Company, Inc., S and S Beverage Inc., William J. Stineman and K&L Beverage, LLC (as the indemnifying S and S shareholders), and William J. Stineman (as representative of the S and S Shareholders), dated January 22, 2021 is incorporated herein by reference to Exhibit 2.1 of the Company's Current Report on Form 8-K, filed with the SEC on February 5, 2021.
3.1
Amended and Restated Certificate of Incorporation is incorporated herein by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
3.2
Amended and Restated By-Laws is incorporated herein by reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
3.3
Certificate of Designation of the Preferences, Rights, and Limitations of the Series B Preferred Stock is incorporated herein by reference to Exhibit 3.3 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
3.4
Certificate of Designation of the Preferences, Rights, and Limitations of the Series C Preferred Stock is incorporated herein by reference to Exhibit 3.4 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
3.5
Certificate of Designation of the Preferences, Rights, and Limitations of the Series D Preferred Stock is incorporated herein by reference to Exhibit 3.5 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
3.6
Certificate of Amendment to Amendment and Restated Certificate of Incorporation, is incorporated herein by reference to Exhibit 3.6 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
3.7
Articles of Merger Merging KGS Temporary Company, Inc. with and into S and S Beverage Inc., as filed with the Wisconsin Department of Financial Institutions on February 1, 2021 is incorporated herein by reference to Exhibit 3.7 of the Company's Current Report on Form 8-K, filed with the SEC on February 5, 2021.
4.1
Form of Debenture is incorporated herein by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
4.2
Form of Warrant is incorporated herein by reference to Exhibit 4.2 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
4.3s
Form of Stand-alone Debenture is incorporated herein by reference to Exhibit 4.3 of the Company's Registration Statement on Form S-1 (File No.333-239883), filed with the SEC on December 14, 2020.
4.4
Form of Secured Convertible Debenture of the Company sold and issued to YA II PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.4 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
4.4a*
Certificate of Scrivener's Error in respect of the February 10, 2021 Secured Convertible Debenture, executed as of the 18
th
day of February, 2021.
4.4b*
Certificate of Scrivener's Error in respect of the February 10, 2021 Secured Convertible Debenture, executed as of the 15
th
day of March, 2021.
4.4c*
Form of Secured Convertible Debenture of the Company sold and issued to YA II PN, Ltd., on May 5, 2021.
4.5
Form of Warrant of the Company granted to YA II PN, Ltd., on February 11, 2021 is incorporated herein by reference to Exhibit 4.3 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
10.1
Securities Purchase Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.2
Registration Rights Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.3
Independent Contractor Agreement by and between Kona Gold LLC and OPTN Companies Inc., dated April 15, 2020 is incorporated herein by reference to Exhibit 10.3 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.4
Board of Directors Offer Letter between the Company and Matthew Crystal, dated July 24, 2018 is incorporated herein by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.5
Board of Directors Offer Letter between the Company and William Jeffrey Outlaw, dated September 3, 2019 is incorporated herein by reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
79
10.6
Form of Distribution Agreement is incorporated herein by reference to Exhibit 10.6 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.7
Membership Interest Purchase Agreement by and among Elev8 Hemp LLC, PLAD, Inc., and the Company, dated October 10, 2016, is incorporated herein by reference to Exhibit 10.7 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.8
Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc. and the Company, dated March 6, 2018, is incorporated herein by reference to Exhibit 10.8 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.9
Securities Exchange and Settlement Agreement by and between Elev8 Brands, Inc. and the Company, dated November 26, 2019 is incorporated herein by reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.10
Employment Agreement by and between Christopher Selinger and the Company, dated September 1, 2018 is incorporated herein by reference to Exhibit 10.10 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.11
Lease Agreement by and between Kona Gold, LLC and Hay Investment Properties, Inc., dated June 1, 2018 is incorporated herein by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.12
Triple Net Lease Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated May 22, 2019 is incorporated herein by reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.13
Lease Modification Agreement by and between Gold Leaf Distribution, LLC and 3090 S. Hwy 14, LLC, dated April 21, 2020 is incorporated herein by reference to Exhibit 10.13 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.14
Line of Credit Agreement by and between Robert Clark and Gold Leaf Distribution, LLC, dated August 29, 2019 is incorporated herein by reference to Exhibit 10.14 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.15
Line of Credit Agreement by and between Robert Clark and Kona Gold, LLC, dated April 4, 2019 is incorporated herein by reference to Exhibit 10.15 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.15a*
Line of Credit and Security Agreement Modification Agreement #2 to April 4, 2019 Line of Credit Agreement by and between Robert Clark and Kona Gold, LLC, dated April 4, 2021.
10.16
Line of Credit Agreement by and between Matthew Nicoletti and Kona Gold, LLC, dated May 5, 2018 is incorporated herein by reference to Exhibit 10.16 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.17
Standard Promissory Note issued by Gold Leaf Distribution, LLC in favor of Robert Clark, dated February 19, 2019 is incorporated herein by reference to Exhibit 10.17 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.17a*
Standard Promissory Note Modification Agreement to February 19, 2019 Standard Promissory Note issued by Gold Leaf Distribution, LLC in favor of Robert Clark, dated March 15, 2021.
10.18
Standard Promissory Note issued by Kona Gold, LLC in favor of Robert Clark, dated January 15, 2019 is incorporated herein by reference to Exhibit 10.18 of Amendment No. 1 to the Company Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.18a*
Standard Promissory Note Modification Agreement to January 15, 2019 Standard Promissory Note issued by Kona Gold, LLC in favor of Robert Clark, dated April 4, 2021.
10.19
Employment Agreement by and between the Company and Robert Clark, dated August 12, 2015 is incorporated herein by reference to Exhibit 10.19 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.20
Employment Agreement by and between the Company and Lori Radcliffe, dated October 8, 2019 is incorporated herein by reference to Exhibit 10.20 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.21
Amendment to Employment Agreement by and between the Company and Robert Clark, dated December 1, 2016 is incorporated herein by reference to Exhibit 10.21 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.22
Agreement by and between the Company and Ryan Dodd, dated May 1, 2019 is incorporated herein by reference to Exhibit 10.22 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.23
Amendment to Employment Agreement by and between Christopher Selinger and Kona Gold Solutions, Inc., dated May 1, 2020 is incorporated herein by reference to Exhibit 10.23of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.24
Amendment to Employment Agreement by and between Christopher Selinger and the Company, dated January 1, 2019 is incorporated herein by reference to Exhibit 10.24 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.25
Security Agreement by and between the Company and YA II PN, Ltd., dated May 14, 2020 is incorporated herein by reference to Exhibit 10.25 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
80
10.26
Line of Credit and Security Agreement Modification Agreement by and between Kona Gold LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.26 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.27
Line of Credit and Security Agreement Modification Agreement by and between Gold Leaf Distribution LLC and Robert Clark, dated April 1, 2020 is incorporated herein by reference to Exhibit 10.27 of the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on July 16, 2020.
10.28
Terms of Oral Agreement between the Company and Robert Clark is incorporated herein by reference to Exhibit 10.28 of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.29
Waiver Agreement by and between the Company and YA II PN, Ltd., dated October 14, 2020, is incorporated herein by reference to Exhibit 10.29 of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.30
Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.30 of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.31
Paycheck Protection Promissory Note issued in favor of Wells Fargo Bank, N.A. dated May 4, 2020, is incorporated herein by reference to Exhibit 10.31 of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on October 26, 2020.
10.32
Securities Purchase Agreement by and between the Company and YA II PN, Ltd., dated November 30, 2020, is incorporated herein by reference to Exhibit 10.32 to the Company's Registration Statement on Form S-1 (File No.: 333-239883), filed with the SEC on December 14, 2020.
10.33
Form of Securities Purchase Agreement between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.28 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
10.33a*
Form of Limited Amendment Agreement to Securities Purchase Agreement between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021, dated as of May 5, 2021.
10.34
Form of Registration Rights Agreement by and between the Company and YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.29 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
10.35
Form of Amended and Restated Security Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.30 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
10.36
Form of Intellectual Property Security Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.31 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
10.37
Form of Amended and Restated Global Guaranty Agreement of the Company and its subsidiaries in favor of YA II PN, Ltd., for a transaction that closed on February 11, 2021 is incorporated herein by reference to Exhibit 10.32 of the Company's Current Report on Form 8-K, filed with the SEC on February 18, 2021.
31.1*
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
31.2*
Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Rule 13a-14(a) of the Securities Act of 1934.
32.1*
Certification of Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
32.2*
Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
Ex. 101.INS*
XBRL Instance Document
Ex. 101.SCH*
XBRL Taxonomy Extension Schema Document
Ex. 101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
Ex. 101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
Ex. 101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
Ex. 101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith
81
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Kona Gold
    Beverage, Inc.
Dated:	May 17, 2021
/s/
    Robert Clark
President and Chief Executive
    Officer
(Principal Executive Officer)
Dated:	May 17, 2021
/s/
    Lori Radcliffe
Chief Financial Officer
(Principal Financial Officer)
82