Item 1.01. Entry into a Material Definitive Agreement.

Pursuant to a Securities Purchase Agreement dated as of April 25, 2023 (the "SPA"), Kona Gold Beverage, Inc. ("our" or "we"), completed a private placement of a Senior Secured Promissory Note (the "Senior Note") with an initial principal amount of $230,000 and the grant of a common stock purchase Warrant (the "Warrant") that is exercisable for the purchase of up to an aggregate of 43,600,000 shares (the "Warrant Shares") of our Common Stock with a third-party investor (the "Investor"). In addition, to secure our obligations to the Investor under the Senior Note, we also entered into a Security Agreement (the "Security Agreement") with and in favor of the Investor. Our subsidiaries are also parties to the Security Agreement.

The transactions contemplated by the SPA were consummated on April 28, 2023 (the "Issue Date"). Upon the funding, we sold and issued the Senior Note and granted the Warrant. Pursuant to the SPA, the purchase price for the Senior Note was $230,000, less $21,900 in fees, which consisted of an 8% "original issue discount" of $18,400 and $3,500 for the Investor's legal fees. In connection with this transaction, we paid JH Darbie & Co. a $6,400 fee.

The Senior Note is due 12 months from its issuance date and is secured by all of our assets and the assets of each of our subsidiaries pursuant to the Security Agreement. The security interest granted to the Investor under the Security Agreement is subordinate to the continuing security interest that remains in effect pursuant to the previous grant of a security interest in connection with a still-outstanding debenture to an earlier investor. Initially, the Senior Note is convertible into shares of our Common Stock (the "Conversion Shares") at a fixed conversion price of $0.004 per share, subject to adjustment due to merger, consolidation, exchange of shares, recapitalization, reorganization, or similar event as set forth in the Senior Note (the "Conversion Price"). The Senior Note contains an adjustment provision that, subject to certain exceptions, reduces the conversion price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current Conversion Price of the Senior Note. Upon any stock splits, reverse stock splits, distributions, stock dividends, or other similar event, the Investor will be entitled to participate in such an event on an "as converted" basis. The Senior Note is subject to a "conversion blocker" such that the Investor cannot convert any portion of the Senior Note that would result in the Investor and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such conversion (excluding, for purposes of such determination, shares of the Common Stock issuable upon conversion of the Senior Note or exercise of the Warrant that had not then been converted or exercised, respectively). The Investor does not have the right to convert the Senior Note until six months after the Issue Date. The Senior Note accrues interest at an annual rate equal to 10% and is due and payable on its maturity date (or sooner if the Investor converts the Senior Note or otherwise accelerates the maturity date, as provided for in the Senior Note). Interest is payable in cash on the maturity date or, in shares of the Common Stock at the then-current Conversion Price if the Investor converts the Senior Note or otherwise accelerates the maturity date, as provided for in the Senior Note.

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

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

Notwithstanding the foregoing, if we have paid the mandatory case prepayment to the Investor during an applicable calendar month pursuant to our senior secured promissory note in the original principal amount of $475,000 that we issued to the Investor in mid-March 2023, then we do not have an obligation to make a mandatory case prepayment in that applicable calendar month with respect to the April 2023 Senior Note.





2

We also granted the Warrant to purchase up to an aggregate of the 43,600,000 Warrant Shares. The Warrant has a five-year term and is immediately exercisable at an exercise price of $0.004 per share, subject to adjustment and is exercisable by the then-holder on a "cashless" basis.

The Warrant contains an adjustment provision that, subject to certain exceptions, reduces the exercise price if we issue shares of our Common Stock or common stock equivalents at a price lower than the then-current exercise price of the Warrant. Any stock splits, reverse stock splits, recapitalizations, mergers, combinations and asset sales, stock dividends, and similar events will result in an equitable adjustment of the exercise price of the Warrant and, in certain circumstances, the number of Warrant Shares. The Warrant is subject to an "exercise blocker," such that the Investor cannot exercise any portion of the Warrant that would result in the Investor and its affiliates holding more than 4.99% of the then-issued and outstanding shares of our Common Stock following such exercise (excluding, for purposes of such determination, shares of the Common Stock issuable upon exercise of the Warrant or conversion of the Senior Note that had not then been exercised or converted, respectively).

The foregoing brief summary description of certain terms and provisions of the Senior Note and the Warrant, the SPA, and the Security Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of each of such agreements, a copy of the form of each of which is attached to this Current Report on Form 8-K, as Exhibits 4.15, 4.16, 10.56, and 10.57, respectively. Readers are encouraged to read each Exhibit in full for a more comprehensive understanding of the transaction described herein.

Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 above is incorporated by reference into this Item 2.03.





3

Item 9.01 Financial Statements and Exhibits.





(d) Exhibits.



Exhibit No.   Description
4.15            Form of Secured Convertible Senior Note of the registrant sold and
              issued to Mast Hill Fund, L.P., for a transaction that closed and
              funded on April 28, 2023.

4.16            Form of Warrant of the registrant granted to Mast Hill Fund, L.P.,
              for a transaction that closed and funded on April 28, 2023.

10.56           Form of Securities Purchase Agreement between the registrant and
              Mast Hill Fund, L.P., for a transaction that closed and funded on
              April 28, 2023.

10.57           Form of Security Agreement of the registrant and its subsidiaries
              in favor of Mast Hill Fund, L.P., for a transaction that closed and
              funded on April 28, 2023.

104           Cover Page Interactive Data File (embedded within the Inline XBRL
              document)




4

© Edgar Online, source Glimpses