Kaya Holdings, Inc 10-K for FY2024
Kaya Holdings, Inc. (KAYS)
About this 10-K
Kaya Holdings, Inc filed this 10-K on April 29, 2025, covering the fiscal year ended December 31, 2024 (FY2024).
Headline figures
Fiscal year ended December 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7134
- Net loss
- $2.08M
- compared with net income of $1.61M a year earlier
- Diluted EPS
- -$0.07
- compared with $0.01 a year earlier
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM
For the Fiscal Year Ended
OR
For the Transition Period from _________ to _________
Commission File No.
(Exact name of registrant as specified in its charter)
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Securities registered under Section 12(b) of the Exchange Act: None
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DOCUMENTS INCORPORATED BY REFERENCE:
KAYA HOLDINGS, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED DECEMBER 31, 2022
TABLE OF CONTENTS
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information contained in this Annual Report contains “ forward-looking statements ” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “ Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the ‘ Exchange Act ”). These forward-looking statements are contained principally in the sections titled “Item 1. Business,” “Item 1A. Risk Factors,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and are generally identifiable by use of the words “ may ,” “ will ,” “ should ,” “ expect ,” “ anticipate ,” “ estimate ,” “ believe ,” “ intend ” or “ project ” or the negative of these words or other variations on these words or comparable terminology.
The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.
Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Available Information
We file annual, quarterly and special reports and other information with the Securities and Exchange Commission (“SEC”) that can be obtained from the SEC by telephoning 1-800-SEC-0330. The Company’s filings are also available through the SEC’s Electronic Data Gathering Analysis and Retrieval System, known as EDGAR, through the SEC’s website (www.sec.gov).
As used in this Annual Report on Form 10-K (the “ Annual Report ”), the terms “ KAYS ,” “ the Company ,” “ we,” “ us ” and “ our ” refer to Kaya Holdings, Inc. and its owned and controlled subsidiaries, unless the context indicates otherwise.
PART I
Item 1. Business.
Overview
Kaya Holdings, Inc is a holding company focusing on wellness and mental health through operations in psychedelic treatment clinics, medical and recreational cannabis, and CBD products.
In 2014, KAYS became the first US public company to own and operate a medical cannabis dispensary in the United States and has again broken ground with the licensing and opening in August 2024 of The Sacred Mushroom Psychedelic Treatment Center in Portland, Oregon. KAYS is operating The Sacred Mushroom as part of its Fifth Dimension Therapeutics, Inc. subsidiary (“FDT”), which also intends to work cooperatively with select pharmaceutical companies to maximize the curative and therapeutic potential of psilocybin.
KAYS has approximately ten years of operational experience as a vertically integrated legal cannabis enterprise both operating legal marijuana dispensaries, as well as cultivation and manufacturing facilities. During the ten years of cannabis operations the Company has produced, distributed, and/or sold a full range of premium cannabis products including flower, oils, vape cartridges and cannabis infused confections, baked goods and beverages through a fully integrated group of subsidiaries supporting highly distinctive brands.
In late 2019 the Company determined that US Federal cannabis legalization was not likely to come to fruition anytime soon and began to explore overseas opportunities for cannabis operations. The Company currently has one retail cannabis license in Oregon and two medical marijuana production and processing licenses in Greece.
In addition, with respect to the pending legalization of psilocybin treatments in Oregon and their potential therapeutic value for treatment-resistant mental health disorders, we began to explore opportunities in the psychedelic treatment space in order to expand our business operations.
In November 2020, Oregon became the first state in the United States to legalize and license the supervised use of psilocybin, and in January 2023, the Oregon Health Authority (the “OHA”) began accepting applications for licenses for facilitators who would be authorized to operate psilocybin treatment clinics, psilocybin manufacturing and testing operations and clinics where clients would be able to obtain psilocybin treatment services. The OHA had also launched licensing of Oregon’s legal cannabis program in 2014, giving KAYS critical experience in comprehending and complying with OHA mandates.
On December 13, 2022 the Company formed Fifth Dimension Therapeutics ™ (“FDT”) to seek to provide psychedelic "mind care" treatments to veterans suffering from PTSD, addicts seeking to break addiction, individuals with eating disorders, and others with a wide array of treatment resistant mental health disorders.
On January 3, 2023 the OHA began to accept license applications, allowing each entity to own and operate one (1) Psilocybin manufacturing and processing facility for the production of Psilocybin Mushrooms and derived therapeutics (“Psilocybins”), and up to five (5) Psilocybin Facilitation Centers where clients would go to ingest Psilocybins and experience effects under the supervision of State Licensed Facilitators. The OHA had also launched Oregon’s medical cannabis program in 2014, giving KAYS critical experience in comprehending and complying with OHA mandates. The psilocybin opportunity is a logical extension for Kaya Holdings. The purpose, customer, regulations, and operations, as well as our familiarity with Oregon regulators, are synergistic with our current mission, and can be leveraged within our current operational infrastructure. We anticipate being able to respond to market demand rapidly, upon licensing. The licenses issued in Oregon are the first ever State Legal Licensing of Psilocybin Manufacturing and Treatment Centers, and KAYS is positioned to be first in line due to its operating history in Oregon.
On January 25, 2023 attorney Glenn E.J. Murphy became a founding member of the FDT Board of Directors. Mr. Murphy has agreed to assist FDT with introductions to pharmaceutical companies seeking data and access to psychedelic patients, as well as advising on the development of intellectual property, structure of potential joint ventures, funding opportunities, acquisitions, and other related endeavors. With more than 25 years of experience in corporate legal practice (including both ten years in-house with the Henkel Group and more than 15 years in private practice), Mr. Murphy’s experience has touched on most every aspect of intellectual property practice.
In March 2023, Bryan Arnold (our longest serving Oregon employee) completed the OHA certified psilocybin education program and became came one of the first 18 program graduates to obtain Psilocybin Facilitator certification in Oregon. Mr. Arnold also obtained a Facilitation License from the OHA, which authorizes him to oversee up to five psilocybin treatment facilities and one psilocybin treatment facility. The Company expects to enroll additional potential candidates in the program as we grow our psychedelic treatment operations.
In November, 2023, the Company filed a license application with the OHA for the licensure of The Sacred Mushroom an approximately 11,000 square foot psychedelic treatment center located in Portland, Oregon which the Company intends to operate as its flagship psychedelic treatment facility.
We received our license for our psilocybin treatment facility from the OHA in April 2024 and began providing treatments in September 2024. It is our understanding is that we are the first US Public Company to own and operate a US based licensed Psychedelic Treatment Facility.
In April 2025, we suspended payroll to our employees due to capital constraints and we are evaluating the operational structure of the facility with a view to restructuring operations in order to generate greater revenues.
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The Science of Psilocybin and Treatment Resistant Mental Health Issues
Growing evidence suggests that psychedelics act on the brain’s default network, or those regions of the brain that remain active when your brain is not engaged in active tasks. The default network provides a “framework” for the brain’s activity, providing structure and making order of all that is happening in the cortex and keeping external neurological information (delivered via our senses) distinct from internally generated activity (thoughts, emotions, and memory).
Psychedelics seem to suppress the default network, relaxing the separation of our senses, memories, thoughts, and emotions, and enabling each to influence each other more easily. This ability to break down the brain’s “framework” has led to a focus on psychedelics as a groundbreaking opportunity to address a wide range of mental health disorders.
Psilocybin, a naturally occurring compound found in “magic mushrooms”, is one of an emerging class of psychedelic medicines that contain potent psychoactive chemicals that can serve to affect human perception, emotions, and other cognitive functions. Psychedelic medicines have been found to have ground-breaking potential in treating a range of physical and mental disorders including anxiety and panic disorder, resistant depression, opiate addiction, adult attention deficit hyperactivity disorder (“ADHD”), post-traumatic stress disorder (“PTSD”), and acute and chronic pain.
A 2020 study in the Journal of the American Medical Association Psychiatry found that 71% of the patients with severe, previously treatment-resistant depression, showed “clinically significant improvement” that lasted at least four weeks and with “low potential” for addiction after treatment with Psilocybin. Speaking on the study one of the study’s co-authors, Alan Davis, a neuroscience researcher at Ohio State University and adjunct professor at the Johns Hopkins Center for Psychedelic and Consciousness Research stated, “I would say at this stage the research is showing that in safe settings, this provides relief from debilitating mental health problems for some people.”
It is estimated that approximately 46.5 million American adults (18%) battle an anxiety disorder such as Post Traumatic Stress Disorder (PTSD) and Panic Disorders, 24.5 million American adults (9.5%) suffer from depressive illness (with someone committing suicide every 40 seconds), 17.3 million American adults (6.7%) have been diagnosed with Alcohol Use Disorder, 18.3 million American adults (7.1%) are considered drug dependent, and 11.4 million American women (8.5%) and 3 million American men (2.5%) struggle with an eating disorder. All of these difficult to treat mental health disorders have been shown by research to be aided by psychedelic treatment.
Companies such as Compass Pathways, ATAI Life Sciences, and Cybin are engaged in developing synthetic versions of psilocybin and psilocin (the active ingredient in “magic mushrooms”) to offer as breakthrough therapies for treatment resistant mental health disorders. As a “Delivery of Treatment” provider, it is expected that The Sacred Mushroom™ and similar facilities will be the safe environment needed for these emerging pharma-based psychedelic treatments. As these companies endure the costly, time consuming, and unpredictable path to FDA approval, we believe that The Scared Mushroom will establish its position as a leader in the delivery of psychedelic care, offering more immediate relief for people with pressing mental health conditions.
KAYS believes that its facility offers a superior setting, broader activity and treatment options with pricing at or near the lower range, thereby enabling us to deliver a superior treatment experience at a much lower price than the competition, while still achieving profitability.
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The Sacred Mushroom™ Psychedelic Treatment Facility
It has been shown that Set and Setting are the keys to the successful psilocybin journeys. (Set as in mindset, Setting as in the place). With this in mind, the curators at The Sacred Mushroom™ (“TSM”) carefully considered every detail to enable an extraordinary setting. TSM provides guests access to psilocybin treatments in a spacious, comfortable, carefully controlled environment under licensure by the OHA (OHA).
Situated in downtown Portland in Old Chinatown, The Sacred Mushroom™ is less than 30 minutes from Portland International Airport (PDX) and conveniently accessible by public transportation. The Sacred Mushroom™ is seven floors above the city of Portland, with panoramic views of the city skyline and Mount Hood. The Sacred Mushroom™ encompasses approximately 11,000 sq ft. and provides guests with access to private treatment rooms, group session areas, and activity zones with movement, listening stations, journaling chairs, and art expression for distinctive, effective, and positive psilocybin treatments. The setting and space are designed to deliver the ultimate in safe, comfortable, and relaxing psychedelic treatments.
With peaceful gardens, engaging sensory areas, and comfortable seating everywhere, every inch of our 11,000 square feet has been designed with your psilocybin journey in mind.
In April 2025, we suspended payroll to our employees due to capital constraints and we are evaluating the operational structure of the facility with a view to restructuring operations in order to generate greater revenues.
View from The Sacred Mushroom™ - Mount Hood can be seen
above the Portland, Oregon skyline from our 7th floor facility.
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Entrance and Reception
A warm and welcoming entrance with plants everywhere
and engaging images projected onto the wall.
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Psilocybin Administration/Integration Area
A large inviting room with video conferencing and comforting amenities.
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The East Room Group Areas
A Serenity Fountain greets our guests as they enter the East Room Group Area.
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Sitting areas with carefully selected and spaced plants allow for
both privacy and flow through connectivity.
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A large kitchen area allows for a comfortable café setting.
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Stunning views of Downtown Portland and Mount Hood from the café Area.
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The West Room Activity & Garden Areas
Our West Wing is centered around an indoor garden that “brings the outdoors in”
affording our guests the ultimate in psilocybin journey experiences.
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Garden areas complete with grass mat seating merge with sitting areas
and high-resolution wall projections.
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As with the East area, stunning views of Downtown Portland abound in this area of the facility.
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Areas dedicated to yoga and body movement, as well as spaces for art expression
and journaling allow guests to pursue different activities.
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Private Treatment Rooms
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Comfort focused rooms with adjustable beds, seating, and a wide range of amenities
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The United States Psilocybin and Psychedelic Medicine Industry
Oregon and Colorado are currently the only two states that have legalized Psilocybin for use within a regulatory framework.
Oregon is the most mature market but Colorado is moving closely behind it and is in process of licensing facilitators and As of the date of this filing Colorado has completed their licensing framework for Psilocybin Access and is in process of processing applications and licensing Colorado Psilocybin Facilitators in a framework similar to the Oregon Model. The Sacred Mushroom is working with a Portland, Oregon training program that is approved by the Colorado Psilocybin Licensing Program, and is utilizing The Sacred Mushroom’s Psilocybin Service Center as a practicum site for the completion of facilitator training prior to licensing.
There are four steps to the psilocybin therapeutic model in Colorado: assessment, preparation, administration and integration. First, an interested participant will go through a screening process to determine if they are a good fit for psychedelic therapy and the type of facilitator they would work best with. The participant then meets with their facilitator to learn about the administration process, set goals for their session and develop a safety plan.
Then, the facilitator will administer psilocybin at a licensed service center, overseeing the session and supporting the participant throughout. An administration session can last five hours or longer. The participant will meet with their facilitator again after their session to “integrate insights and learnings from the psilocybin experience into daily life” and make plans for future support needed.
Participants will primarily take psilocybin at a healing center, but the law will also permit clinical facilitators to offer psilocybin services at their existing practice, a retreat model where participants may stay overnight and reflect on their experiences for several days, and at-home administration with additional safety measures in place.
In addition to Oregon and Colorado, California and Washington State are moving towards the same type of license usage framework, and other states have approved decriminalization, currently allow medical research or have legislation in different stages of progress as denoted in the table below:
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| Current psychedelic legal status by state | |
| State | Legal status |
| Alabama | No state legislation |
| Alaska | Active legislation in progress |
| Arizona | Inactive/failed legislation attempts |
| Arkansas | No state legislation |
| California | Local reforms to support decriminalization |
| Colorado | Legalized |
| Connecticut | Medical research/trials ongoing |
| Delaware | No state legislation |
| Florida | Inactive/failed legislation attempts |
| Georgia | Inactive/failed legislation attempts |
| Hawaii | Medical research/trials ongoing |
| Idaho | No state legislation |
| Illinois | Active legislation in progress |
| Indiana | Active legislation in progress |
| Iowa | Inactive/failed legislation attempts |
| Kansas | No state legislation |
| Kentucky | Medical research/trials ongoing |
| Louisiana | No state legislation |
| Maine | Active legislation in progress |
| Maryland | Medical research/trials ongoing |
| Massachusetts | Local reforms to support decriminalization |
| Michigan | Active legislation in progress |
| Minnesota | Medical research/trials ongoing |
| Mississippi | No state legislation |
| Missouri | No state legislation |
| Montana | Inactive/failed legislation attempts |
| Nebraska | No state legislation |
| Nevada | Medical research/trials ongoing |
| New Hampshire | Inactive/failed legislation attempts |
| New Jersey | Reduced penalty |
| New Mexico | Judicial exceptions |
| New York | Active legislation in progress |
| North Carolina | Active legislation in progress |
| North Dakota | No state legislation |
| Ohio | Inactive/failed legislation attempts |
| Oklahoma | No state legislation |
| Oregon | Legalized |
| Pennsylvania | Inactive/failed legislation attempts |
| Rhode Island | Inactive/failed legislation attempts |
| South Carolina | No state legislation |
| South Dakota | No state legislation |
| Tennessee | No state legislation |
| Texas | Medical research/trials ongoing |
| Utah | Medical research/trials ongoing |
| Vermont | Active legislation in progress |
| Virginia | Inactive/failed legislation attempts |
| Washington | Medical research/trials ongoing |
| West Virginia | Inactive/failed legislation attempts |
| Wisconsin | No state legislation |
| Wyoming | No state legislation |
Source: Psychedelic legalization & Decriminalization Tracker from Psychedelic Alpha, which collaborated with UC Berkley Center for the Science of Psychedelics and Calyx Law to provide this data
(https://psychedelicalpha.com/data/psychedelic-laws)
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Cannabis Operations
Kaya™ Family of Brands
During the last 10 years of cannabis operations the Company has produced, distributed, and/or sold a full range of premium cannabis products including flower, oils, vape cartridges and cannabis infused confections, baked goods and beverages through a fully integrated group of subsidiaries and companies supporting highly distinctive brands.
The Company currently maintains an extensive genetic library of seeds for top strains of cannabis that it has assembled from its own grow operations and other commercial sources which it intends to utilize to launch international grow operations in Greece and elsewhere.
Kaya Farms™ Cannabis
Kaya Buddie™ Strain Specific Cannabis Cigarettes
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Kaya Brands International
In 2019 KAYS formed Kaya Brands International, Inc. (“Kaya International” or “KBI”), to leverage its experience and expand into worldwide cannabis markets. KBI’s current initiative includes Greece, with additional areas under consideration.
Kaya Farms Greece
In September 2017, the Greek government announced it would be legalizing medical cannabis, and less than a year later Greek leaders approved Law 4523 and Joint Ministerial Decision No. 51483, which permitted farming and production of medical cannabis. In 2020 the Greek Parliament passed legislation that further relaxed cannabis export regulations, now permitting the bulk export of cannabis flower.
We have selected Greece as the center of our European market activity because of its amenable cannabis regulations, favorable climate, affordable, capable workforce, and the country’s position as a major pharmaceutical center in Europe.
As an EU nation Greece opens up the entire European market (where legal) to KAYS flower and oils, and as permitted, the KAYS portfolio of brands.
On January 11, 2021, through a majority owned subsidiary of KBI, Kaya Farms Greece (or “KFG”) and Greekkannabis (“GKC”, an Athens based cannabis company) executed an agreement for KBI to acquire 50% of GKC. The first 25% was acquired in January, 2021 and the remaining 25% was acquired in July, 2021. GKC’s projects include two medical cannabis cultivation and processing projects in Greece- one in Epidaurus, Greece and the other in Thebes, Greece. Additionally, on November 8, 2021 KAYS/KBI through a majority owned subsidiary of KBI (Kaya Farms Greece or “KFG”) executed an agreement to acquire 50% of Greekkaya, a second medical Cannabis in Epidaurus, Greece.
GKC has a development license from the Greek authorities that was originally issued as part of a plan purchase and develop 15 acres in Thebes, Greece as a large-scale cultivation production and processing project. However, GKC has elected to hold off on acquiring the land until such time as European cannabis demand warrants the investment required to develop the project.
The Epidaurus Project consists of 2 connected industrial buildings (already constructed, approximately 50,000 square feet in total under-air space) situated on 2.8 acres of land, with its own independent industrial electrical power center and ample water supply to service the needs of the facility. The Epidaurus Project will include 25,000 square feet of indoor cannabis cultivation, a 15,000 square foot EU-GMP extraction and processing facility, and a 10,000 square foot EU-GMP packing area. There is ample room for expansion with room to construct an additional 15,000 square feet on site. The joint venture is awaiting project financing and final license approval from Greek government authorities.
Neither of the two subject Greece properties are currently owned or optioned by GKC or its operating subsidiaries, but the land for the potential project in Epidaurus is owned by one of our Greek partner’s families and the land in Thebes is currently available for purchase or option. The Company believes it could acquire either of the properties once funding and market conditions allow. Alternatively, both licenses are in good order, and can be transferred to a new location pending Greek Government approval.
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Kaya Kannabis- Epidaurus, Greece Project
Site of Epidaurus Land and Overview of Building Complex
GKC plans to cultivate and manufacture KAYS proprietary cannabis brands (CBD/THC) from the Epidaurus Project for distribution in the Greek, German and other EU markets as permitted by local regulations.
Epidaurus Project with 50K square feet of already constructed buildings.
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The Global Cannabis Industry
The global cannabis market is being driven by the increasing number of countries passing legislation to decriminalize the use of cannabis and legalize cannabis for medicinal use. This change in legislation is the result of an increase in public awareness to the medicinal benefits of cannabis and greater social acceptance of cannabis use. According to Statista, cannabis is expected to reach a legal market of 74 billion USD by 2029, for a CAGR of 3.01%.
Prohibition Partners, expects the North American market to remain the world’s largest until 2023, when they expect North American ($17.7 billion) to outpace Europe ($16.8 billion). By 2024, with a forecasted global market of $103.9 billion, Europe is expected to outperform North America $39.1 billion to $37.9 billion.
Of the $103.9 billion global cannabis market forecasted by Prohibition Partners, $62.7 billion is expected to be medical cannabis driven. Of this $62.7 billion, Europe is expected to be the largest market, with $22.3 billion, followed by North America with $20.2 billion.
Government Regulation
We are subject to general business regulations and laws, as well as regulations and laws directly applicable to our operations. As we continue to expand the scope of our operations, the application of existing laws and regulations could include matters such as pricing, advertising, consumer protection, quality of products, and intellectual property ownership. In addition, we will also be subject to new laws and regulations directly applicable to our activities.
While the State of Oregon has created a regulatory framework through the Oregon Health Authority (OHA) that allows for the administration of psilocybin to clients in OHA Licensed Psilocybin Treatment Facilities, the use and possession of Psilocybin is currently illegal under Federal Law.
Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, which could hinder or prevent the growth of our business.
Federal, state and local laws and regulations governing legal recreational and medical marijuana use are broad in scope and are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws or allegations of such violations could disrupt our planned business and adversely affect our financial condition and results of operations. In addition, it is possible that additional or revised federal, state and local laws and regulations may be enacted in the future governing the legal marijuana industry. There can be no assurance that we will be able to comply with any such laws and regulations and its failure to do so could significantly harm our business, financial condition and results of operations.
Our foreign operations will also be subject to comparable government regulation in Greece and any other various foreign jurisdictions in which KAYS intends to operate.
Competition
The legal marijuana sector is rapidly growing and the Company faces significant competition in the operation of retail outlets and grow facilities. Many of these competitors will have far greater experience, more extensive industry contacts and greater financial resources than the Company. There can be no assurance that we can adequately compete to succeed in our business plan.
The legal psychedelic medicine sector is rapidly growing, and while the industry is at a much earlier stage than cannabis, the Company will also face significant competition in the operation of retail outlets and grow facilities. Many of these competitors will have far greater experience, more extensive industry contacts and greater financial resources than the Company. There can be no assurance that we can adequately compete to succeed in our business plan.
Employees
As of the date as of this Report, our Oregon operations have 2 full-time employees, consisting of Chad Craig, the Senior Vice President of Oregon Operations and Bryan Arnold, Vice President of KAYS Subsidiary Fifth Dimension Therapeutics, Inc. and Lead Facilitator of the Sacred Mushroom Psychedelic Treatment Center. Additionally, we engage part time employees for support staff and facility maintenance, licensed psilocybin facilitators that are paid as independent contractors to conduct psilocybin facilitation sessions and consultants to assist with daily duties and business implementation and execution. Additional employees will be hired and other consultants engaged in the future as we execute our business plan.
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Item 1A. Risk Factors.
We have a relatively short operating history in our current business upon which investors can evaluate our future prospects.
The Company was incorporated in 1993 and has engaged in a number of businesses as both a private and as a publicly held company.
KAYS’s legal medical and recreational marijuana business (which it has focused on in Oregon since 2014 and in Greece since 2020) has not generated sufficient revenue to enable the Company to achieve profitability. In addition, the overall US market for legal marijuana has not been as robust as anticipated because of the lack of legalization on a federal level. Accordingly, we have recently reduced our US retail operations and expanded into establishing a psilocybin therapy and treatment center in Portland, Oregon where such treatment has recently been legalized. However, our psilocybin treatment center (which was licensed by the Oregon Health Authority (“OHA”) In April 2024 and began providing treatments in September, 2024) has only generated only limited revenues to date. In April 2025, we suspended payroll to our employees due to capital constraints and we are evaluating the operational structure of the facility with a view to restructuring operations in order to generate greater revenues.
Accordingly, our operations continue to be subject to all the problems, expenses, difficulties, complications and delays encountered in an early-stage business. There can be no assurance that the Company will generate significant revenues or operate at a profit.
The Company will require additional financing to become commercially viable.
The Company’s current psilocybin and legal marijuana operations can be capital intensive.
During the years ended December 31, 2023, and December 31, 2022 and the nine months ended September 30, 2024 and September 30, 2023, we raised approximately $615,000, $370,000, $872,500 and $455,000, respectively, through a series of private debt and equity offerings to finance operations.
There can be no assurance that the Company will become commercially viable without additional financing, the availability and terms of which are uncertain. If the Company cannot secure necessary capital when needed on commercially reasonable terms, its business, condition (financial and otherwise) and commercial viability may be harmed. Although management believes that it will be able to successfully execute its business plan, which includes third party financing and the raising of capital to meet the Company’s future liquidity needs, there can be no assurances in this regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern.
In April 2025, we suspended payroll to our employees due to capital constraints and we are evaluating the operational structure of the facility with a view to restructuring operations in order to generate greater revenues.
We currently rely on certain key individuals, and the loss of one of these key individuals could have an adverse effect on the Company.
Our success depends to a certain degree upon certain key members of our management and certain key consultants to the company. These individuals are a significant factor in our growth and success. The loss of the services of such members of management could have a material adverse effect on our Company.
The Company’s success will be dependent in part upon its ability to attract qualified personnel and consultants.
The Company’s success will be dependent in part upon its ability to attract qualified creative marketing, sales and development professionals. The inability to do so on favorable terms may harm the Company’s proposed business.
KAYS must effectively meet the challenges of managing expanding operations.
The Company’s business plan anticipates that operations will undergo expansion in 2025 and beyond. This expansion will require the Company to manage a larger and more complex organization, which could place a significant strain on our managerial, operational and financial resources. Management may not succeed with these efforts. Failure to expand in an efficient manner could cause expenses to be greater than anticipated, revenues to grow more slowly than expected and could otherwise have an adverse effect on the business, financial condition and results of operations.
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Marijuana and Psilocybin remains illegal in the United States under federal law.
Notwithstanding its legalization for recreational and/or medical use by a growing number of states, the growing, transport, possession or selling of marijuana continues to be illegal under federal law. Additionally, the growing, transport, possession or selling of psilocybin is also illegal under federal law and only a handful of states have decriminalized its usage, with Oregon being the only state that has devised a state legal licensing system that allows for providing access to psilocybin therapies in a carefully controlled environment.
Although the current administration has made policy decisions to allow implementation of state laws legalizing recreational and/or medical marijuana and not to federally prosecute anyone operating under state law, the continuance of that policy is not assured and could change at any time.
While we seek the advice of counsel with respect to our operations within these industries, federal action could determine that our marijuana and/or psilocybin operations are illegal and adversely affecting KAYS’s business, financial condition and results of operations.
The marketing and market acceptance of marijuana and psilocybin may not be as rapid as KAYS expects.
The market for state legal marijuana and Psilocybin is quickly evolving, and activity in the sector is expanding rapidly. Demand and market acceptance for state legal marijuana and psilocybin are subject to uncertainty and risk, as changes in the price and possible adverse political efforts could influence and denigrate demand. KAYS cannot predict whether, or how fast, this market will grow or how long it can be sustained. If the market for state legal marijuana and psilocybin develops more slowly than expected or becomes saturated with competitors, KAYS’s operating results could be adversely impacted.
KAYS’s business activities are part of emerging industries.
The Company intends to implement an aggressive plan of growth to enter the legal recreational and medical marijuana industry, as well as the emerging psilocybin industry. These industries are new and emerging, and have yet to fully define competitive, operational, financial and other parameters for successful operations. By pursuing a growth strategy to enter a new and emerging industry, the Company’s operations may be adversely impacted as the industry’s competitive, operational, financial and other parameters take shape. Given the fluidity of the industry, the Company may make errors in implementing its business plan, thereby limiting some or all of its ability to perform in accordance with its expectations.
Our business could be affected by changes in governmental regulation.
Federal, state and local laws and regulations governing state legal recreational and medical marijuana and psilocybin use are broad in scope and are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. Violations of these laws or allegations of such violations could disrupt KAYS’s planned business and adversely affect our financial condition and results of operations. In addition, it is possible that additional or revised federal, state and local laws and regulations may be enacted in the future governing the legal marijuana industry. Our foreign operations will also be subject to comparable government regulation in Greece and any other various foreign jurisdictions in which KAYS intends to operate. There can be no assurance that KAYS will be able to comply with any such laws and regulations and its failure to do so could significantly harm our business, financial condition and results of operations.
We will likely face significant competition.
The legal marijuana and the psilocybin industry is in its early stages and is attracting significant attention from both small and large entrants into the industry. KAYS expects to encounter significant competition as it implements its business strategy. The ability of KAYS to effectively compete could be hindered by a lack of funds, poor positioning, management error, and other factors. The inability to effectively compete could adversely affect our business, financial condition and results of operations.
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We have borrowed and may be required to borrow funds in the future.
If the Company incurs indebtedness, a portion of its cash flow will have to be dedicated to the payment of principal and interest on such indebtedness. Typical loan agreements also might contain restrictive covenants, which may impair the Company’s operating flexibility. Such loan agreements would also provide for default under certain circumstances, such as failure to meet certain financial covenants. A default under a loan agreement could result in the loan becoming immediately due and payable and, if unpaid, a judgment in favor of such lender which would be senior to the rights of the Company’s stockholders. A judgment creditor would have the right to foreclose on any of the Company’s assets resulting in a material adverse effect on the Company’s business, operating results or financial condition.
Currently the Company has limited assets which could be used as collateral in obtaining future borrowings. Because of the Company’s inability to provide lenders with collateral and a limited history of successful operations, the Company may not be successful in its efforts to obtain additional funds though borrowings and as a result may not be able to fund required costs of operations.
Adverse global economic conditions could have a negative effect on our business, results of operations and financial condition and liquidity.
A general slowdown in the global economy, including a recession, or in a particular region or industry, an increase in trade tensions with U.S. trading partners, inflation or a tightening of the credit markets could negatively impact our business, financial condition and liquidity. Adverse global economic conditions have from time to time caused or exacerbated significant slowdowns in the industries and markets in which we operate, which have adversely affected our business and results of operations. Macroeconomic weakness and uncertainty also make it more difficult for us to accurately forecast revenue, gross margin and expenses, and may make it more difficult to raise or refinance debt.
Worldwide economic and social instability could adversely affect our revenue, financial condition, or results of operations.
Generally, worldwide economic conditions remain uncertain, particularly due to the effects of the conflict between Russia and Ukraine and between Israel and Hamas, disruptions in the banking system and financial markets, pandemic, increased inflation and rising interest rates. The general economic and capital market conditions, both in the U.S. and worldwide, have been volatile in the past and at times have adversely affected the Company’s access to capital and increased the cost of capital. The capital and credit markets may not be available to support future capital raising activity on favorable terms. If economic conditions decline, the Company’s future cost of equity or debt capital and access to the capital markets could be adversely affected. Our vendors may experience financial difficulties or be unable to borrow money to fund their operations, which may adversely impact their ability to purchase our products or to pay for our products on a timely basis, if at all. In addition, adverse economic conditions, such as recent supply chain disruptions and labor shortages and persistent inflation, have affected, and may continue to adversely affect our suppliers’ ability to provide our manufacturers with materials and components, which may negatively impact our business. These economic conditions make it more difficult for us to accurately forecast and plan our future business activities.
Risks Related to our Status as a Public Company
Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act `Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial officer and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
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| ● | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company | |
| ● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and | |
| ● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identify other deficiencies that we may not be able to timely remediate. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes Oxley”). Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly.
As a smaller reporting company, we are subject to scaled disclosure requirements that may make it more challenging for investors to analyze our results of operations and financial prospects.
Currently, we are a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act. As a “smaller reporting company,” we are able to provide simplified executive compensation disclosures in our filings and have certain other decreased disclosure obligations in our filings with the SEC, including being required to provide only two years of audited financial statements in annual reports. Consequently, it may be more challenging for investors to analyze our results of operations and financial prospects.
Furthermore, we are a non-accelerated filer as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide an auditor attestation of management’s assessment of internal control over financial reporting, which is generally required for SEC reporting companies under Section 404(b) of the Sarbanes-Oxley Act. Because we are not required to, and have not, had our auditors provide an attestation of our management’s assessment of internal control over financial reporting, a material weakness in internal controls may remain undetected for a longer period.
The costs of being a public company could result in us being unable to continue as a going concern.
As a public company, we are required to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of this compliance could be significant. If our revenues do not increase and/or we cannot satisfy many of these costs through the issuance of our shares, we may be unable to satisfy these costs in the normal course of business that would result in our being unable to continue as a going con
Risks Related to our Common Stock
The market for the KAYS Shares is extremely limited and sporadic
KAYS’s common stock is quoted on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. The market KAYS’s for common stock is limited and sporadic. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of KAYS’s common stock for reasons unrelated to operating performance. Moreover, the trading of securities in the OTCQB is often more sporadic than the trading of securities listed on a quotation system like NASDAQ, or a stock exchange like the New York Stock Exchange.
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KAYS’s common stock is a penny stock. Trading of KAYS’s common stock may be restricted by the penny stock regulations adopted by the Securities and Exchange Commission (the “SEC”) and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our common stock.
KAYS’s common stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. KAYS’s common stock is covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, KAYS’s common stock.
In addition to the penny stock rules promulgated by the SEC, FINRA (the Financial Industry Regulatory Authority) has adopted rules that require when recommending an investment to a customer, a broker- dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low -priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA’s requirements make it more difficult for broker-dealers to recommend that their customers buy KAYS’s common stock, which may limit investor ability to buy and sell KAYS’s comm
The market for penny stocks has experienced numerous frauds and abuses that could adversely impact KAYS’s common stock.
Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:
| ● | control of the market for the security by one or a few broker-dealers that are often related to a promoter or issuer; |
| ● | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; | |
| ● | boiler room practices involving high pressure sales tactics and unrealistic price projections by salespersons; | |
| ● | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
| ● | wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
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FINRA sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.
In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our common stock and have an adverse effect on the market for shares of our common stock.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
| ● | actual or anticipated variations in our operating results; | |
| ● | announcements of developments by us or our competitors; | |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; | |
| ● | adoption of new accounting standards affecting our Company’s industry; | |
| ● | additions or departures of key personnel; | |
| ● | sales of our common stock or other securities in the open market; and | |
| ● | other events or factors, many of which are beyond our control. |
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been initiated against the company. Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management’s attention and resources, which could harm our business and financial condition.
If securities analysts do not initiate coverage or continue to cover our common stock or publish unfavorable research or reports about our business, this may have a negative impact on the market price of our common stock.
The trading market for the common stock will depend on the research and reports that securities analysts publish about our business and the Company. We do not have any control over these analysts. There is no guarantee that securities analysts will cover the common stock. If securities analysts do not cover the common stock, the lack of research coverage may adversely affect its market price. If we are covered by securities analysts, and our stock is the subject of an unfavorable report, our stock price and trading volume would likely decline. If one or more of these analysts ceases to cover the Company or fails to publish regular reports on the Company, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.
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The board of directors of KAYS has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to adversely affect common stockholder voting power and rights upon liquidation.
KAYS’s Certificate of Incorporation allows us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders of preferred stock the rights to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.
The ability of our principal stockholders, including our CEO, to control our business may limit or eliminate minority stockholders’ ability to influence corporate affairs.
The principal non-affiliated stockholder of KAYS holds 4,000,000 shares of common stock and 20 shares of Series D Convertible Preferred Stock. Additionally, our CEO owns 6,113,345 shares of common stock and 20 shares of Series D Convertible Preferred Stock. Each Series D Preferred Share votes as 1% of the issued and outstanding common shares on an as converted, fully diluted basis. There are presently 41,572,835 shares of common stock outstanding, so factoring in the conversion of these Series D Preferred Shares means that these two parties have approximately 54% of votes on matters presented to stockholders.
Accordingly, these two individuals are in a position to significantly influence membership of our board of directors as well as all other matters requiring stockholder approval. The interests of our principal stockholders may differ from the interests of other stockholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of other officers and directors and other business decisions. The minority stockholders have no way of overriding decisions made by our principal stockholders. This level of control may also have an adverse impact on the market value of our shares because our principal stockholders may institute or undertake transactions, policies or programs that result in losses and/or may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares to significantly decrease our price per share.
We do not expect to pay cash dividends in the foreseeable future.
KAYS has not paid cash dividends on its shares of common stock and does not intend to do so at any time in the foreseeable future. The future payment of dividends depends upon future earnings, capital requirements, financial requirements and other factors that the companies’ board of directors will consider. Since they do not anticipate paying cash dividends on the common stock, return on investment, if any, will depend solely on an increase, if any, in the market value of the common stock.
The conversion of the 40 shares of KAYS’ outstanding Series D Preferred stock by the CEO and an unrelated third-party stockholder would result in the issuance of an additional 27,715,222 shares of KAYS’ common stock, (without taking into effect the conversion into shares of KAYS common stock of any or all outstanding convertible debt described in this prospectus). Accordingly, such market overhang could adversely impact the market price of the common stock.
KAYS has 40 shares of Series D Convertible Preferred Stock outstanding, 20 shares of which are held by our CEO and 20 of which are held by an unrelated third-party stockholder. These preferred shares can be converted into a total of 27,715,222 shares of KAYS common stock which would result in substantial dilution if converted.
Additionally, as of the date of this filing the Company has convertible debt of approximately $8,079,652 principal amount (without taking into effect the accrued interest which could also be converted) which can be converted into KAYS stock at $0.08 per share (with certain ratchet provisions that would allow stock to be issued at lower prices in event of market reductions in the price of KAYS stock, with a minimum conversion price of $0.02 per share), subject to certain ownership volume limitations and could result in further substantial dilution if all converted.
Such market overhang of both the KAYS Series D Preferred Shares and the KAYS Convertible Debt could adversely impact the market price of KAYS’s common stock as a result of the dilution which would result if such securities were converted into shares of KAYS common stock.
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Future sales of shares of KAYS common stock pursuant to Rule 144 under the Securities Act could adversely affect the market price of KAYS’s common stock.
KAYS has a substantial number of shares of common stock which were issued in transactions exempt from the registration requirements of the Securities Act and are now available for public sale pursuant to the Rule 144 under the Securities Act. Such sales could adversely affect the market price of KAYS’s common stock.
Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interested director transactions, conflicts of interest and similar matters.
Sarbanes-Oxley as well as rule changes proposed and enacted by the SEC, the NYSE/AMEX and the NASDAQ Stock Market as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the NASDAQ Stock Market. Because we are not currently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with voluntary compliance, we have not yet adopted these measures.
We do not currently have independent audit or compensation committees. As a result, directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested- director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations as a
We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley. The enactment of Sarbanes-Oxley has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.
You may experience dilution of your ownership interests because of the future issuance of additional shares of common stock.
In the future, we may issue additional authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our stockholders. We may also issue additional shares of our securities that are convertible into or exercisable for common stock, as the case may be, in connection with hiring or retaining employees, future acquisitions, future sales of its securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of common stock may create downward pressure on the value of our securities. There can be no assurance that we will not be required to issue additional shares of common stock, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a price (or exercise prices) below the price at which our shares may be valued or are trading in a public market.
We have agreed to indemnify our officers and directors and a Key Consultant against lawsuits to the fullest extent of the law.
KAYS is a Delaware corporation. Delaware law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Our organizational documents provide for this indemnification to the fullest extent permitted by law. This may result in a major cost to the corporation and hurt the interests of stockholders because corporate resources may be expended for the benefit of directors and officers.
The Company has been advised that, in the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
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Item 1B. Unresolved Staff Comments.
Not applicable.
Item 1C. Cybersecurity.
Item 2. Properties.
The Sacred Mushroom Psychedelic Treatment Center occupies approximately 11,000 square feet of leased space (the entire seventh floor) in the gentrifying Old Chinatown area of downtown Portland, Oregon. provides guests with access to private treatment rooms, group session areas, and activity zones with movement, listening stations, journaling chairs, and art expression for distinctive, effective, and positive psilocybin treatments. The setting and space are designed to deliver the ultimate in safe, comfortable, and relaxing psychedelic treatments.
KAYS also leases a work apartment for Craig Frank and other Company personnel in Portland, Oregon, for visiting personnel who are in Oregon in connection with the Company’s operations in that state.
KAYS currently leases a modest corporate office of less than 1,000 square feet in Fort Lauderdale, Florida for use by Craig Frank, KAYS Chief Executive Officer and other Company personnel. However, in during the first quarter of 2025, the Company closed this office due to the increased amount of time spent in Oregon by our CEO and increased capital needs in other areas of operations.
Item 3. Legal Proceedings.
From time-to-time KAYS may be party to various legal proceedings in the ordinary course of business. Please see paragraphs below for results of legal proceedings during 2024 and 2023.
Lawsuit from Law Offices of Ross Day
On September 9, 2022 the Company received notice from its Oregon Counsel that Day Law & Associates, P.C. (Attorney Ross Day is a former attorney for the Company) had filed suit in Washington County, Oregon seeking damages in the amount of $16,169.24 for unpaid legal fees, plus any costs, disbursements and attorney fees awarded.
On August 24, 2023 the Company and Day Law & Associates participated in an Arbitration in an attempt to resolve the Matter without Litigation, and on October 11, 2023 the Arbitrator ruled in favor of the Company and awarded the Company $3,000 in legal Fees and $781 in Costs. However, the Company subsequently agreed to waive the Award in consideration of Day Law dropping the matter.
Lawsuit from P3 Distributing LLC
On February 23, 2024 the Company received notice from its Oregon Counsel that P3 Distributing L.L.C (a vendor that supplied containers used in the sale of cannabis) had filed suit in Marion County, Oregon seeking damages in the amount of $12,149.00 for unpaid vendor invoices, plus interest at the rate of 9% per annum from February 29, 2020.
On October 17, 2024 the Company settled the Lawsuit with P3 Distributing. Terms for the settlement require a monthly payment of $300.00 per month for 18 months with a ballon payment of $11,779.20 due at the conclusion of the payment schedule.
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PART II
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.
Market for Common Stock
Our common stock is currently traded on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. under the symbol “KAYS.” Such market is extremely limited. We can provide no assurance that our shares will continue to be traded on the OTCQB or another exchange, or if traded, that the current public market will be sustainable.
Holders of Our Common Stock
As of the date of this Annual Report, we had 41,572,835 shares of common stock issued and outstanding and approximately 652 holders of record of our common stock.
One of these holders is CEDE and Company which is the mechanism used for brokerage firms to hold securities in book entry form on behalf of their clients. As of the date of this Annual Report, CEDE held 8,860,806 shares of common stock for these stockholders. When the Company last received a report from CEDE it showed a log of 7,669 stockholders that consented to release their name to the Company for purposes of stockholder communications. Accordingly, we believe that KAYS has approximately 8,000 beneficial stockholders as of such date.
Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future insurance under equity compensations plans (excluding securities reflected in column (a)) | |||
| Equity compensation plans approved by security holders | 0 shares (1) | n/a | 0 shares | |||
| Equity compensation plans not approved by security holders | 0 shares | n/a | 0 shares | |||
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Recent Sales of Registered and Unregistered Securities (includes common stock, preferred stock, convertible debt and debt issuances/cancellations)
On January 20, 2024, the Company commenced a private placement offering (the “2024 Private Placement”) of Units (“Units”) at a price of $25,500 per Unit. Each Unit consisted of a 10% two-year promissory note of the Company in the original principal amount of $25,000 and 50,000 shares of common stock of Fifth Dimension Therapeutics, Inc. (“FDT”) for $500. Each note is convertible at the option of the holder at any time prior to maturity, into (a) shares of common stock of KAYS on terms comparable to those of our outstanding prevailing notes at time of conversion; or (b) in the event FDT, our majority owned subsidiary completes a public offering, shares of FDT common stock at a 20% discount to the offering price.
On January 23, 2024, CVC International Ltd. (the “Investor”) purchased 2.4 Units in the 2024 Private Placement for $61,200.000 Pursuant to the terms of the 2024 Private Placement, the Investor was issued a $60,000 note and 120,000 shares of common stock of FDT.
On January 31, 2024, the holder of the $15,000 10% promissory note issued in December 2023, applied the principal amount of $15,000 and $300 of accrued interest on the promissory note to the purchase of .6 Units in the 2024 Private Placement. Pursuant to the terms of the 2024 Private Placement, the purchaser was issued a $15,000 note and 30,000 shares of common stock of FDT.
On March 12, 2024, the Investor purchased an additional 6 Units in the 2024 Private Placement for $153,000. The price paid included $150,000 in new capital and $3,000 in accrued interest on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of 2024 Private Placement, the Investor was issued a $150,000 note and 300,000 shares of common stock of FDT.
On March 15, 2024, the holder of the $100,000 promissory note issued in August 2023, applied the principal amount of $100,000 and $9,650 of accrued interest on the note to the purchase of 4.3 Units in the 2024 Private Placement. Pursuant to the terms of the 2024 Private Placement, the holder received a $107,500 note and 215,000 shares of common stock.
On May 1, 2024, the Investor purchased an additional 6 Units in the 2024 Private Placement for $153,000. The price paid included $130,000 in new capital and $23,000 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $150,000 note and 300,000 shares of common stock of FDT.
On June 4, 2024, the Investor purchased an additional 6 Units in the 2024 Private Placement for $153,000. The price paid included $150,000 in new capital and $3,000 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $150,000 note and 300,000 shares of common stock of FDT.
On July 22, 2024, the Investor purchased an additional 7 Units in the 2024 Private Placement for $178,000. The price paid included $125,000 in new capital and $53,500 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $175,000 note and 350,000 shares of common stock of FDT.
On September 13, 2024, the Investor purchased an additional 10 Units in the 2024 Private Placement for $255,000. The price paid included $125,000 in new capital and $130,000 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $150,000 note and 500,000 shares of common stock of FDT.
On October 29, 2024, the Investor purchased an additional 10 Units in the 2024 Private Placement for $255,000. The price paid included $125,000 in new capital and $130,000 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $150,000 note and 500,000 shares of common stock of FDT.
On December 14, 2024, the Investor purchased an additional 10 Units in the 2024 Private Placement for $255,000. The price paid included $100,000 in new capital and $155,000 in accrued interest and principal on a prior promissory note held by the Investor which was applied to the purchase price. Pursuant to the terms of the 2024 Private Placement, the Investor received a $150,000 note and 500,000 shares of common stock of FDT.
The Company issued the foregoing securities pursuant to the exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
Item 6. [Reserved].
Not applicable.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Results of Operations
Year ended December 31, 2024 compared to year ended December 31, 2023
Revenues
We generated revenues from continuing operations of $7,134 for the year ended December 31, 2024, compared to $0 for the year ended December 31, 2023. These revenues were primarily related to the early-stage development of our Psychedelic Medicine business, including The Sacred Mushroom™ facility in Portland, Oregon.
Revenues from discontinued operations, which reflect our former cannabis retail business under Marijuana Holdings Americas, Inc., a Florida corporation (“MJAI”), totaled $28,009 in 2024, compared to $196,294 in 2023. The significant decrease in discontinued revenues was due to the closure of our last remaining retail dispensary in Oregon during the first half of 2024, in line with our strategic shift away from the U.S. cannabis retail market. As a result, MJAI was classified as a discontinued operation for the year ended December 31, 2024.
Cost of Sales
Cost of sales from continuing operations was $7,500 for the year ended December 31, 2024, compared to $0 for the year ended December 31, 2023, reflecting the initial launch phase of our Psychedelic Medicine business.
Cost of sales from discontinued operations, related to our former retail cannabis business under MJAI, was $13,406 for 2024, compared to $81,345 for 2023. The year-over-year decrease corresponds with the closure of MJAI’s dispensary operations during the first half of 2024 and the resulting wind-down of cannabis-related retail activity.
Operating Expenses
General and administrative expenses from continuing operations were $605,388 for the year ended December 31, 2024, compared to $269,772 in 2023. Salaries and wages from continuing operations totaled $31,320 in 2024, compared to $0 in 2023. General and administrative expenses from discontinued operations were $36,648 in 2024, compared to $127,190 in 2023. Salaries and wages from discontinued operations totaled $132,031 in 2024, compared to $209,433 in 2023. The year-over-year changes primarily reflect the wind-down of MJAI’s cannabis retail operations and the pre-opening expenses associated with the launch of The Sacred Mushroom™ facility.
Professional fees from continuing operations were $1,384,954 for the year ended December 31, 2024, compared to $752,973 in 2023. Professional fees from discontinued operations totaled $0 in 2024 and $0 in 2023. The overall increase in professional fees was primarily driven by stock-based compensation issued during 2024.
After giving effect to all of the foregoing, operating expenses from continuing operations were $2,021,662 for the year ended December 31, 2024, compared to $1,022,745 for the year ended December 31, 2023. Operating expenses from discontinued operations totaled $168,679 in 2024, compared to $336,623 in 2023. Correspondingly, the Company recorded an operating loss from continuing operations of $2,022,028 in 2024, compared to $1,022,745 in 2023. Operating loss from discontinued operations was $154,076 in 2024, compared to $221,674 in 2023.
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Interest expense
Interest expense from continuing operations was $738,290 for the year ended December 31, 2024, as compared to $665,427 for the year ended December 31, 2023, reflecting a slight increase of additional debt incurred in 2024. Interest expense from discontinued operations was $0 and $0 for the years ended December 31, 2024 and 2023.
Net Income (Loss)
After giving effect to an operating loss of $2,022,028, interest expense of $738,290, amortization of debt discount of $119,029, gain on sale of the license of $1,700, other income of $3,614, and change in derivative liabilities income of $813,922 arising from the decrease of our stock prices which increased the volatility factors used in the derivative calculations. Net loss from discontinued operations for the same period was $162,441, which includes the results of MJAI’s cannabis retail business prior to its closure in Q2 2024.We had net loss from non-controlling interest of $141,696 for the year ended December 31, 2024. Additionally, the Company has accrued a tax liability of $902,166 related to potential taxes due under the IRS Code 280E.
This compares to a net income from non-controlling interest of $26,794 for the year ended December 31, 2023, after giving effect to an operating loss of $1,022,745, interest expense of $665,427, amortization of debt discount of $387,072, and gain on sales of land $177,883, offset by gain from a change in derivative liabilities expense of $3,297,215 and other income of $100,072. Net income from discontinued operations was $136,565, and from non-controlling interest net income was $26,794, during the year ended as December 31, 2023. The net loss attributable to the Company for 2024 was $2,080,856 and net income attributable to the Company for 2023 was $1,609,697.
Liquidity and Capital Resources
During 2024 our cash position increased by $10,560 to $10,778 and our negative working capital deficit was $8,035,323.
As of December 31, 2024, our working capital consisted of cash of $39,668, inventories of $90 and prepaid expenses of $28,180 as compared to cash of $29,108, inventories of $9,259 and prepaid expenses of $58,588 as of December 31, 2023.
Our current liabilities include accounts payable and accrued expenses of $631,963, accounts payable and accrued expenses-related parties of $869,864, accrued interest of $ 3,005,107, current portion of lease liability of $52,574, tax liability of $902,166, convertible notes payable- net of discount of $135,000, notes payable of $9,312 and derivative liabilities of $2,497,275 as of December 31, 2024. As compared to current liabilities include accounts payable and accrued expenses of $589,085, accounts payable and accrued expenses-related parties of $514,972, accrued interest of $2,369,015, current portion of lease liability of $30,885, tax liability of $899,344, convertible notes payable- net of discount of $125,000, notes payable of $124,312 and derivative liabilities of $2,752,321 as of December 31, 2023.
The following table sets forth the major sources and uses of cash for the years ended December 31, 2024 and 2023:
| Year Ending December 31, 2024 | Year Ending December 31, 2023 | |||||||
| Net cash used in operating activities | $ | (830,820 | ) | $ | (1,182,364 | ) | ||
| Net cash provided by investing activities | 4,012 | 812,859 | ||||||
| Net cash provided by financing activities | 1,004,107 | 245,000 | ||||||
| Effects of currency translation on cash and cash equivalents | (4,298 | ) | (1,282 | ) | ||||
| Net cash used in operating activities from discontinued operations | (162,441 | ) | 136,565 | |||||
| Net increase in cash | $ | 10,560 | $ | 10,778 | ||||
Cash Used in Operating Activities
During 2024, from continuing operations, we had cash of $830,820 used in operating activities, as compared to cash used in operations of $1,182,364 in 2023. From discontinued operations, we had cash of 162,441 used in and $136,565 provided by operating activities during the year ended December 31, 2024 and 2023, respectively.
Cash Provided by (Used in) Investing Activities
During 2024, we had cash of $4,012 provided by investing activities, as compared to $812,859 provided by investing activities in 2023. Cashflow in 2024 decreased due to retail business closed in Oregon.
Cash Provided by Financing Activities
During 2024, $1,557,500 of notes payable was issued and $553,392 of convertible notes were paid off, as compared to $615,000 of notes payable was issued and $370,000 of convertible notes were paid off in 2023.
Additional Capital
At December 31, 2024, we had cash of $39,668 and a working capital deficiency of $8,035,323 as compared to cash of $29,108 and a working capital deficiency of $7,307,979 at December 31, 2023.
Management believes that it will require additional capital, in addition to anticipated revenues from operations to fund expansion of the Company’s operations and ultimately achieve profitability. The Company intends to seek such additional capital from further private offerings of equity and/or debt securities. However, we may not be successful in raising additional capital on commercially reasonable terms, if and when needed, in which case our business, financial condition, cash flows and results of operations may be materially and adversely affected.
In April 2025, we suspended payroll to our employees due to capital constraints and we are evaluating the operational structure of the facility with a view to restructuring operations in order to generate greater revenues.
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Critical Accounting Estimates
The following are deemed to be the most significant accounting estimates affecting us and our results of operations:
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured.
To confirm, all of our OLCC licensed cannabis retail sales operations are conducted and operated on a “cash and carry” basis- product(s) from our inventory accounts are sold to the customer(s) and the customer settles the account at time of receipt of product via cash payment at our retail store; the transaction is recorded at the time of sale in our point-of-sale software system. Revenue is only reported after product has been delivered to the customer and the customer has paid for the product with cash.
To date the only other revenue we have received is for ATM transactions and revenue from this activity is only reported after we receive payment via check from the ATM service provider company.
Fair value of financial instruments
The Company follows the provisions of ASC 820. This Topic defines fair value, establishes a measurement framework and expands disclosures about fair value measurements. We apply these provisions to estimate the fair value of our financial instruments including cash, accounts payable and accrued expenses, and notes payable.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Our deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.
ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
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Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
Provision for Income Taxes
We recorded a provision for income taxes of $0 from continuing operations and $8,365 from discontinued operations for the year ended December 31, 2024, compared to $0 from continuing operations and $23,327 from discontinued operations for the year ended December 31, 2023. Although we have net operating losses that we believe are available to offset this tax liability, it arises under Section 280E of the Internal Revenue Code due to our cannabis-related operations. As a conservative measure, we have accrued this liability in connection with our discontinued business.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.
Recently issued accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
Recently adopted accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. Refer to Note 16 in the consolidated financial statements, Segment Reporting and Information about Geographic Areas for the inclusion of the new required disclosures.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 8. Financial Statements and Supplementary Data.
See the Index of Consolidated Financial Statements on page F-1 below.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Disclosure controls and procedures
Under the direction of our Chairman and President, who is our principal, executive, financial and accounting officer, we evaluated our disclosure controls and procedures as of December 31, 2024. Our Chairman and President, who is our principal, executive, financial and accounting officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2024.
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and President, who is our principal, executive, financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and President, who is our principal, executive, financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our fourth fiscal quarter covered by this report. Based on the foregoing, our Chairman and President concluded that our disclosure controls and procedures were not effective. It should be noted that the design of any system of controls is based in part upon 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, regardless of how remote.
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Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chairman and President, who is our principal, executive, financial and accounting officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
| ▪ | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; | |
| ▪ | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and | |
| ▪ | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s Chairman and President, who is our principal, executive, financial and accounting officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024. In making this assessment, the Company’s Chairman and President, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.
Based on the assessment performed, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has concluded that the Company’s internal control over financial reporting, as of December 31, 2024, is not effective to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements in accordance with generally accepted accounting principles. Further, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has identified material weaknesses in internal control over financial reporting as of December 31, 2024.
Based on an evaluation, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of December 31, 2024 (the “Evaluation Date”), to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) accumulated and communicated to the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Each of the following is deemed a material weakness in our internal control over financial reporting:
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| ▪ | We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management’s view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures. | |
| ▪ | We did not maintain proper segregation of duties for the preparation of our financial statements. We currently have only one officer overseeing all transactions. This has resulted in several deficiencies, including the lack of control over preparation of financial statements and proper application of accounting policies | |
| ▪ | Lack of controls over related party transactions: As of December 31, 2024, the Company did not establish a formal written policy for the approval, identification and authorization of related party transactions. |
The Company’s Chairman and President, who is our principal, executive, financial and accounting officer, believes that the material weaknesses set forth in the two items above did not have an effect on our financial results. However, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and financial procedures, which could result in a material misstatement in our consolidated financial statements in future periods.
Changes in Internal Control over Financial Reporting
There was no change in our internal controls or in other factors that could affect these controls during the fourth quarter of the year ended December 31, 2024 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Our directors and executive officers and their respective ages and titles are as follows:
| Name | Age | Position(s) and Office(s) Held |
| Craig Frank | 64 | Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer, Director |
| Mitchell Chupak | 70 | Director |
Set forth below is a brief description of the background and business experience of our directors and executive officers.
Craig Frank became Chairman of the Board, President, Chief Executive Officer and a Director of the Company in January 2010. He assumed the appointed position of acting Chief Financial Officer in 2012. For the past 15 years, Mr. Frank has served as Chairman and CEO of Tudog International Consulting, a Florida-based company with business advisory, business development, market research, training, and merchant banking divisions. During his tenure at Tudog, Mr. Frank has worked with more than 200 companies from 19 countries. In addition, in such capacity, he developed the business plan for a biofuels company based in Central America, and is the co-founder of the Company’s predecessor, which we acquired in January 2010. He remains Tudog’s Chairman. Mr. Frank is a widely published author with articles on business matters featured in magazines and newsletters internationally, including publications of the Guatemala America Chamber of Commerce, the Israel Export Institute, the Romania Chamber of Commerce, and the World Association of Small and Medium Sized Enterprises. He is also an in-demand speaker at international conferences, including the Florida Sterling Council, the International Project Management Association, The Central American Center for Entrepreneurship, the Israel Center for Entrepreneurial Studies, and the Pino Center for Entrepreneurship at Florida International University. The Company believes that Mr. Frank’s consulting and entrepreneurial experience brings significant value to our management team.
Mitchell Chupak became a director in December, 2020 to fill a vacancy created by the resignation of Jordi Arimany. Mitchell Chupak has resided in Israel since 1972, where since 1997, he has been the Director of Development for the Jaffa Institute, the largest not for profit social service agency serving southern portions of Tel-Aviv-Jaffa, Israel and its suburbs. During his over 25 years at the Jaffa Institute, Mr. Chupak has grown the organization extensively and is responsible for development of major social services, educational and community projects for which he secured millions of dollars in funding. He developed funding sources worldwide and enlisted the aid of major donors in the United States, Canada, Europe, Australia, and South America.
In 2005, Mr. Chupak created the Israel Fundraisers Forum to assist other non-profit organizations better understand methods of fundraising. The forum, with which he has been associated since its founding, promotes professionalism in fundraising and development and assists both organizations and individual fundraisers to improve methods of the profession.
We believe that Mr. Chupak’s spectrum of experience in both management and funding will add value our board of directors.
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Terms of Office
Our directors are appointed for a one-year term to hold office until the next annual meeting of our stockholders and until a successor is appointed and qualified, or until their removal, resignation, or death. Executive officers serve at the pleasure of the board of directors.
Board Committees
Two of our three directors are “independent” within the scope of the rules adopted by the NASDAQ Stock Market and the SEC: Ms. Schwarz and Mr. Chupak. However, our board of directors does not currently have an audit committee, a compensation committee, or a corporate governance committee. We plan to establish such committees in the near future.
Board of Directors Role in Risk Oversight
Members of the board of directors have periodic meetings with management and the Company’s independent auditors to perform risk oversight with respect to the Company’s internal control processes. Our board is currently comprised of a majority of independent directors. The Company believes that the board’s role in risk oversight does not materially affect the leadership structure of the Company.
Code of Ethics
We adopted a Code of Business Conduct and Ethics (the “Ethics Code”) on February 28, 2013 that includes provisions ranging from conflicts of interest to compliance with all applicable laws and regulations. All officers, directors and employees are bound by the Ethics Code, violations of which may be reported to any independent member of the board of directors.
Insider Trading Policy
The Company has
Item 11. Executive Compensation
Summary Compensation Table
The table below summarizes all compensation awarded to, earned by, or paid to our Chief Executive Officer and acting Chief Financial Officer, who is our sole executive officer, for the years ended December 31, 2024 and December 31, 2023.
SUMMARY COMPENSATION TABLE
| Name and principal position | Year | Salary ($) |
Bonus ($) |
Stock Awards (#) |
Option Awards (#) |
Non-Equity Incentive Plan Compensation($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) | ||||||||||||||||||
|
Craig Frank CEO/Acting CFO
|
2024 | 4 | $300,000 | 4,000,000 | 0 | 0 | 0 | 0 |
$300,000 (1) |
||||||||||||||||||
| 2023 | $300,000 |
1,500,000 (3) |
0 | 0 | 0 | 0 | $300,000 (2) |
| (1) | Mr. Frank’s compensation for 2024 was a total of $122,250 paid in cash and $77,750 in accruals. |
| (2) | Mr. Frank’s compensation for 2023 was a total of $194,273 paid in cash and $105,727 in accruals. |
| (3) | Represents “restricted ” shares of our common stock valued at $0.04 per share. |
Mr. Frank's compensation was paid to The Tudog Group, Inc., of which Mr. Frank is the Chairman and a principal.
Employment and Consulting Agreements
The Company is currently not a party to any employment agreement with its executive officers. The Company compensates Craig Frank, its
Chief Executive Officer and acting Chief Financial Officer, for his services at the rate of $25,000 per month through a consulting arrangement
with Tudog International Consulting (“Tudog”) of which firm Mr. Frank is Chairman and a Principal. Due to the liquidity
of the Company, the monthly payments to Tudog accrue and are paid subject to available cash flow.
Outstanding Equity Awards at Fiscal Year-End
| None. |
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Compensation of Directors
Our non-employee directors are compensated with the issuance of restricted common stock in amounts determined annually by the board of directors. During the year ended December 31, 2023, no shares were issued to our Directors. In 2024 we issued to both Carrie Schwarz(who resigned as a director in April 2025) and Mitchell Chupak (our two non-employee directors) 1,000,000 shares of restricted stock each for their work in 2023 and through August 31, 2024.
2022 Equity Incentive Stock Plan
In 2022 we adopted a new equity incentive plan (the 2022 Equity Incentive Plan) as our prior plan expired in 2021
Our 2022 Incentive Stock Plan, as amended (the “Plan”) provides for equity incentives to be granted to our employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the Plan, restricted stock awards, other stock- based awards, or any combination of the foregoing. The Plan is administered by the board of directors.
As of December 31, 2024 awards covering 4,550,000 shares have been issued under the Plan and 450,000 shares of common stock were available for issuance under the Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth the beneficial ownership of our common stock by each director and executive officer, by all directors and executive officers as a group and by each other person known by us to beneficially own 5% or more of our common stock as of the date of this Annual Report. The address of each such person is c/o the Company21218 St. Andrews Blvd., #300, Boca Raton, FL 33433.
| Name and Address of Beneficial Owner and Directors and Executive officers: | Number of Shares of Common Stock | Number of Shares of Preferred Stock | Percentage of common shares | Number of shares of common stock-Diluted | Percentage of common shares-Diluted | |||||||||||||||
| Craig Frank (1) (2) | 6,113,345 | 20 | 14.71 | % | 19,970,956 | 28.82 | % | |||||||||||||
| Mitchel Chupak | 1,350,601 | — | 3.25 | % | 1,350,601 | 1.95 | % | |||||||||||||
| All directors and executive officers, as a group (two persons) (1) (2) | 7,463,946 | 20 | 17.96 | % | 21,321,557 | 30.77 | % | |||||||||||||
| Other 5% or greater stockholders: | ||||||||||||||||||||
| RLH Financial Partners, Inc | 4,000,000 | 20 | 9.62 | % | 17,857,611 | 25.77 | % | |||||||||||||
| CEDE & CO | 8,860,806.00 | — | 21.31 | % | 8,860,806 | 12.79 | % | |||||||||||||
| CITY VIEW WINERY LLC | 2,500,000.00 | — | 6.01 | % | 2,500,00.00 | 3.61 | % | |||||||||||||
| Sharon C Jones | 2,166,668.00 | — | 5.21 | % | 2,166,668 | 3.13 | % | |||||||||||||
| Craig Frank | 1,903,060.00 | — | 4.58 | % | 1,903,060 | 2.75 | % | |||||||||||||
| Ilan Sarid | 1,533,131.00 | — | 3.69 | % | 1,533,131 | 2.21 | % | |||||||||||||
| Total shares outstanding (TB) | 41,572,835 | |||||||||||||||||||
| Total shares-diluted | 69,288,058 | |||||||||||||||||||
| Diluted shares for 20 PS (Craig Frank) | 13,857,611 | |||||||||||||||||||
| Diluted shares for 20 PS (RLH) | 13,857,611 | |||||||||||||||||||
* Less than 1%
| 1. | includes shares beneficially owned by Tudog and Drora Frank, Mr. frank’s spouse. |
| 2. | Includes 13,857,611 shares of common stock issuable upon conversion of 20 shares of our Series D Convertible Preferred Stock held by Mr. Frank, which shares vote on an “as converted” basis. |
| 3. | Includes 13,857,611 shares of our common stock issuable upon conversion of 20 shares of our Series D Convertible Preferred Stock held by RLH Financial Partners, Inc. which shares vote on an “as converted” basis. |
41
Securities Authorized for Issuance under Equity Compensation Plans
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights |
Number of securities remaining available for future insurance under equity compensations plans (excluding securities reflected in column (a)) | |||
| Equity compensation plans approved by security holders | 0 shares (1) | n/a | 450,000 shares | |||
| Equity compensation plans not approved by security holders | 0 shares | n/a | ||||
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Related Party Transactions
None.
Review, Approval and Ratification of Related Party Transactions
Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions with our executive officers, directors and significant stockholders. However, all such matters are approved by our independent directors as well as the board of directors as a whole prior to implementation.
Item 14. Principal Accountant Fees and Services.
Audit and Accounting Fees
The following is a summary of the fees billed to us for professional services (a) for the years ended December 31, 2024 and 2023 by M&K CPAS, PLLC our independent public registered accounting firm and by L&L CPAS PA., our Outsource CFO and Accounting Services firm.
| MKA CPA Fees (Auditor) | 2024 | 2023 | ||||||
| Audit fees | $ | 45,000 | $ | 40,425 | ||||
| Audit-related fees | -0- | -0- | ||||||
| Tax fees | -0- | -0- | ||||||
| All other fees- quarterly reviews (3 quarters) | $ | 24,000 | $ | 22,050 | ||||
| $ | 62,475 | $ | 62,475 | |||||
Audit fees consist of billings for the audit of the Company’s consolidated financial statements included in our Annual Reports on Form 10-K and reviews of the consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.
The Company does not have an Audit Committee. It is the Company’s policy to have its Chief Executive Officer preapprove all audit and permissible non-audit services provided by the independent public accountants, subject to approval by the board of directors.
These services may include audit, audit-related, tax and other services. Pre-approval is generally for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. Unless there are significant variations from the pre-approved services and fees, the independent public accountants and management generally are not required to formally report to the Board of Directors regarding actual services and related fees.
| L&L Fees (Outsource CFO and Accounting Services) | 2024 | 2023 | ||||||
| Bookkeeping and Accounting fees (12 months) | $ | 24,000 | $ | 24,000 | ||||
| Preparation of quarterly reports for Auditor review in conjunction with submission of financials to SEC | $ | 24,000 | $ | 24,000 | ||||
| $ | 48,000 | $ | 48,000 | |||||
Outsource CFO and Accounting Fees consist of preparation of the consolidated financial statements of Kaya Holdings, Inc. and its subsidiaries, which comprise the following:
1. Preparation of the balance sheets for four quarters of year ended 12.31.24 and 12.31.23, respectively, and the related statements of income, retained earnings, and cash flows for the year then ended and the related notes to the financial statements.
2. Bookkeeping services for the years ended 12.31.24 and 12.31.23, respectively,
3. Preparation and filing of quarterly state sales tax returns.
4. Other accounting matters for the years ended 12.31.24 and 12.31.23, respectively,
42
PART IV
Item 15. Exhibits and Financial Statement Schedules.
| a) | The following documents are filed as part of this Annual Report: | |
| (1) | Financial Statements – The following Consolidated Financial Statements of the Company are contained in Item 8 of this Annual Report: | |
| • | Reports of Independent Registered Public Accounting Firms | |
| • | Consolidated Balance Sheets at December 31, 2024 and 2023 | |
| • | Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 | |
| • | Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2024 and 2023 | |
| • | Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 | |
| • | Notes to the Consolidated Financial Statements. | |
| (2) | Financial Statement Schedules were omitted, as they are not required or are not applicable, or the required information is included in the Consolidated Financial Statements. | |
| (3) | Exhibits – The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b32 under the Exchange Act: |
| Exhibit No. | Description of Exhibit | ||
| 3.1 | Certificate of Incorporation, as amended (1) | ||
| 3.2 | Bylaws, as amended(1) | ||
| 10.12 | 2022 Incentive Stock Plan(1) + | ||
| 10.2 | Form of 8% Convertible Promissory Note (1) |
| 14.1 | Insider Trading Policy(2) |
| 21.1 | Subsidiaries of Registrant (1) | ||
| 23.1 | Consent of M&K CPAS LLC(2) | ||
| 31.1 | Section 302 Certification(2) | ||
| 32.1 | Section 906 Certification(2) |
| (1) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, as amended (File No. 333-283570) and incorporated herein by reference. |
| (2) | Filed herewith. |
+ Management compensation arrangement.
Item 16. Form 10-K Summary.
None.
43
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: April 16, 2025
| KAYA HOLDINGS, INC. | ||
| By: | /s/ Craig Frank | |
| Craig Frank | ||
| Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer | ||
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, this Annual Report on Form 10K has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
| Signature | Title | Date |
| / s/ Craig Frank | Chairman of the Board, President, Chief Executive Officer, | |
| Craig Frank | Acting Chief Financial Officer and Director (Principal Executive, Financial and Accounting Officer) | April 16, 2025 |
| /s/ Mitchel Chupak | Director | April 16, 2025 |
| Mitchel Chupak |
44
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
45
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Kaya Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Kaya Holdings, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss from continuing operations, net cash used in operations, and a lack of revenues to-date, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Derivative Liabilities
As discussed in Note 11, the Company borrows funds through the use of convertible notes payable that contain a conversion price that may be fixed or fluctuates with the stock price.
Auditing management’s estimates of the fair value of the derivative liability involves significant judgements and estimates given the embedded conversion features of the notes.
To evaluate the appropriateness of the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contract and is recorded as a liability subject to market adjustments as of each reporting period. Significant judgment is exercised by the Company in determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management.
We evaluated management’s conclusions regarding their derivative liability and reviewed support for the significant inputs used in the valuation model, as well as assessing the model for reasonableness. Additionally, we evaluated management’s disclosure of the Derivative Liabilities calculations in Note 11 of the consolidated financial statements.
/s/ M&K CPAS, PLLC
We
have served as the Company’s auditor since 2018
April 29, 2025
F-1
Kaya Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2024 and 2023
| ASSETS | ||||||||
| (Audited) | (Audited) | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Right-of-use asset - operating lease | ||||||||
| Property and equipment, net of accumulated depreciation of $ | ||||||||
| Goodwill | ||||||||
| Other Assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| Accounts payable and accrued expense-related parties | ||||||||
| Accrued interest | ||||||||
| Right-of-use liability - operating lease | ||||||||
| Taxable Payable | ||||||||
| Convertible notes payable, net of discount of $ | ||||||||
| Notes payable | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Accrued expense-related parties | ||||||||
| Accrued interest, non-current | ||||||||
| Notes payable | ||||||||
| Notes payable-related party | ||||||||
| Convertible notes payable, net of discount of $ | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS' DEFICIT: | ||||||||
| Convertible preferred stock, Series D, par value $; shares authorized; and issued and outstanding as of December 31, 2024 and December 31, 2023, respectively | ||||||||
| Common stock , par value $; shares authorized; shares issued, outstanding as of December 31, 2024 and shares issued, outstanding as of December 31, 2023 , respectively | ||||||||
| Subscriptions payable | ||||||||
| Treasury stock, at cost, shares | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Total stockholders' deficit attributable to parent company | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ( | ) | ||||||
| Operating expenses: | ||||||||
| Professional fees | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Gain on sale of land | ||||||||
| Gain on sale of the license | ||||||||
| Change in derivative liabilities expense | ||||||||
| Other income (expense) | ||||||||
| Total other income (loss) | ( | ) | ||||||
| Net income from continuing operations before income taxes | ( | ) | ||||||
| Provision for Income Taxes | ||||||||
| Net income (loss) - from continued operations | ( | ) | ||||||
| Net Income (loss) from discontinued operations before tax | ( | ) | ||||||
| Provision for income taxes on discontinued operations | ( | ) | ( | ) | ||||
| Net income (loss) - from discontinued operations | ( | ) | ||||||
| Net income (loss) | ( | ) | ||||||
| Net income (loss) attributed to non-controlling interest | ( | ) | ||||||
| Net income (loss) attributed to Kaya Holdings, Inc. | ( | ) | ||||||
| Basic net (loss) income from continuing operations per common share | $ | ( | ) | $ | ||||
| Basic net (loss) income from discontinued operations per common share | $ | ( | ) | $ | ||||
| Basic net (loss) income per common share | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - Basic | ||||||||
| Diluted net (loss) income from continuing operations per common share | $ | ( | ) | $ | ||||
| Diluted net (loss) income from discontinued operations per common share | $ | ( | ) | $ | ||||
| Diluted net (loss) income per common share | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - Diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income(Loss)
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency adjustments | ( | ) | ||||||
| Comprehensive income (loss) | ( | ) | ||||||
| Comprehensive loss attributable to non-controlling interest | ( | ) | ||||||
| Comprehensive loss attributable to Kaya Holdings | ( | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
For the years ended December 31, 2024 and 2023
| Additional Paid-in Capital | Accumulated Deficit | Accumulated Comprehensive Loss | Noncontrolling Interest | Total Stockholders' Deficit | |||||||||||||||||||||||
| Preferred Stock - Series C | Preferred Stock - Series D | Common Stock | Treasury Stock | Subscription Payable | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Amount | |||||||||||||||||||
| Balance, December 31, 2022 (Audited) | $ | |
$ | |
$ |
|
$ ( |
$ |
$ |
$ ( |
$ ( |
$ ( |
$ ( | ||||||||||||||
| Imputed interest | - | - | - | - | |
| |||||||||||||||||||||
| Settlement of derivative liabilities to additional paid in capital | - | - | - | - | |
| |||||||||||||||||||||
| Release of related party accruals and payable | - | - | - | - | |
| |||||||||||||||||||||
| Translation Adjustment | - | - | - | - | ( |
|
| ||||||||||||||||||||
| Net Income | - | - | - | - | |
|
| ||||||||||||||||||||
| Balance, December 31, 2023(Audited) | |
|
|
|
( |
|
|
( |
( |
( |
( | ||||||||||||||||
| Balance, December 31, 2023 (Audited) | |
|
|
|
( |
|
|
( |
( |
( |
( | ||||||||||||||||
| Imputed interest | - | - | - | - | |
| |||||||||||||||||||||
| Common stock issued for services | - | - | |
|
- | |
| ||||||||||||||||||||
| Common stock issued for services - related parties | - | - | |
|
- | |
| ||||||||||||||||||||
| Common stock issued for acquiring the subsidiary | - | - | |
|
- | |
| ||||||||||||||||||||
| Equity transaction (Sale of subsidiary's stock) | - | - | - | - | |
| |||||||||||||||||||||
| Translation Adjustment | - | - | - | - | ( |
( |
( | ||||||||||||||||||||
| Net Income | - | - | - | - | ( |
( |
( | ||||||||||||||||||||
| Balance, December 31, 2024 (Audited) | |
|
|
|
( |
|
|
( |
( |
( |
( | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statement of Cashflows
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustment to non-controlling interest | ( | ) | ||||||
| Adjustments to reconcile net income / loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Imputed interest | ||||||||
| Loss(Gain) on lease extinguishment | ( | ) | ||||||
| Shares issued for services | ||||||||
| Shares issued for services - related parties | ||||||||
| Shares issued for acquisition - related parties | ||||||||
| Change in derivative liabilities | ( | ) | ( | ) | ||||
| Amortization of debt discount | ||||||||
| Loss(Gain) on sale of land | ( | ) | ||||||
| Loss(Gain) on sale of license | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expense | ( | ) | ||||||
| Inventory | ||||||||
| Right-of-use asset | ||||||||
| Deposit | ( | ) | ||||||
| Accrued interest | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accounts payable and accrued expenses - Related Parties | ||||||||
| Right-of-use liabilities | ( | ) | ( | ) | ||||
| Deferred tax liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Net cash (used in)/provided by Discontinued Operations | ( | ) | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from sales of fixed assets | ||||||||
| Proceeds from sales of business license | ||||||||
| Cash paid for impairment of right-of-use assets | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ||||||
| Proceeds from sales of subsidiary's stock | ||||||||
| Net cash provided by investing activities | ||||||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effects of currency translation on cash and cash equivalents | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH | ||||||||
| CASH BEGINNING BALANCE | ||||||||
| CASH ENDING BALANCE | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid | ||||||||
| NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Shares issued for investment | ||||||||
| Settlement of derivative liabilities | ||||||||
| Adoption of lease standard ASC 842 | ||||||||
| Release of related party accruals and payable | ||||||||
| Reclassification of accrued interest to notes principal | ||||||||
| Recognition of right of use assets and lease liabilities under ASC 842 | ||||||||
| Initial derivatives | ||||||||
| Convertible note balance adjustment | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NOTE 1 – ORGANIZATION AND NATURE OF THE BUSINESS
Organization
Kaya Holdings, Inc. FKA (Alternative Fuels Americas, Inc.) (“KAYS”) is a holding company. The Company was incorporated in 1993 and engaged in a number of businesses until September, 2010. In October, 2010, the Company changed its name to Alternative Fuels Americas, Inc, in connection with the acquisition of a company by that name. The Company assumed its present name in March 2015, in connection with its commencement of operations in the legal cannabis market in Oregon.
The Company has four subsidiaries: Marijuana Holdings Americas, Inc., a Florida corporation (“MJAI”), which is majority-owned and was formed on March 27, 2014 to operate the Company’s cannabis retail business in Oregon. MJAI's operations were discontinued during the six months ended June 30, 2024, and the subsidiary is now classified as a discontinued operation (see Note 4). The Company retains full ownership of MJAI and is evaluating potential sale opportunities for its remaining assets in 2025. 34225 Kowitz Road, LLC, a wholly-owned Oregon limited liability company which held ownership of the Company’s 26 acre property in Lebanon, Oregon (inactive since February 28, 2023 when the subject property was sold), Kaya Brand International, Inc., a Florida Corporation (“KBI”) which is majority-owned and was formed on October 14, 2019 to expand the business overseas (active) and Fifth Dimension Therapeutics, Inc., a Florida corporation which is majority owned (“FDT ”) and was formed on December 13, 2022 to develop and maintain ownership of the Company’s planned Psychedelic Treatment Centers offering psilocybin treatments.
MJAI Oregon 1 LLC is the entity that holds the licenses for the Company’s retail store operations. MJAI Oregon 5 LLC is the entity that held the license application for the Company’s 26 acre farm property in Lebanon Oregon (property sold on February 28, 2023, inactive since that date).
KBI is the entity that holds controlling ownership interests in Kaya Farms Greece, S.A. (a Greek corporation) and Kaya Shalvah (“Kaya Farms Israel”, an Israeli corporation). These two entities were formed to facilitate expansion of the Company’s business in Greece and Israel respectively.
FDT is the entity that was formed to hold interests in psychedelic treatment facilities, with operations initially targeted for Oregon where FDT holds a 49% stake in FDT Oregon 1, LLC (“FDT1”, an Oregon limited liability company) and the Company has an irrevocable option to acquire the remaining 51% stake in FDT1 after the sunsetting in January 1, 2025 of Oregon’s residency requirements for majority ownership in entities that hold OHA issued psilocybin licenses. On September 5, 2024, the Company issued 1,000,000 shares of common stock to FDT Oregon 1 LLC owners who are also the Company’s related parties, to acquire the remaining 51% equity interest of FDT Oregon 1 LLC after January 1, 2025, as per the agreement.
Nature of the Business
In January 2014, KAYS incorporated MJAI, a wholly owned subsidiary, to focus on opportunities in the legal recreational and medical marijuana in the United States.
On July 3, 2014 opened its first Kaya Shack™ MMD in Portland, Oregon. Between April of 2014 and December 31, 2023, KAYS owned and operated four (4) Kaya Shack™ retail cannabis medical and recreational dispensaries, three (3) Medical Marijuana Grow sites licensed by the OHA and two (2) Recreational Marijuana grow sites licensed by the OLCC (all in Oregon). The statuses of these operations are as follows:
The first Kaya Shack™ (Kaya Shack™ Store 1) opened in 2014 in Portland, Oregon at the same address as an Oregon Liquor and Cannabis Commission (OLCC) licensed medical and recreational marijuana retailer. On March 11, 2024, the Company notified the Oregon Liquor Control Commission (the “OLCC”) that we were temporarily closing this location. The Company is currently evaluating redeploying this remaining dispensary license to serve as a delivery hub for Portland residents, tourists and The Sacred Mushroom™ guests, among others. As of June 30, 2024, the Company had ceased all retail cannabis operations under the MJAI subsidiary. Kaya Shack™ Store 1 remained inactive following the March 2024 temporary closure notice to the OLCC, and no further cannabis retail revenue was generated in the second half of the year. Accordingly, the Company has classified MJAI’s operations as discontinued as of year-end. See Note 4 for additional details on discontinued operations.
F-7
Kaya Shack™ Store 2 was closed in December, 2022 as part of a sale and surrender agreement that the Company entered into with the OLCC to resolve an Administrative Action filed by the OLCC (as previously disclosed in the Company’s Annual Report on form 10-K for the period ending December 31, 2021 filed on April 18, 2022 and in the Company’s Quarterly report for the period ending March 31, 2022 filed on May 16, 2022). Per the terms of the agreement the Company agreed to either enter into a purchase and sale agreement for its retail license in South Salem by February 1, 2023 (the renewal date) or surrender the license. On April 21, 2023 the Company concluded the sale of Store 2 for $210,000, less a 6% closing commission and minor closing expenses. After these expenses and paying $75,000 to resolve three non-performing store leases in South Oregon, the Company netted $118,900.
Kaya Shack™ Store 3 and Kaya Shack™ Store 4 were both closed due to consolidation moves by the Company in 2020 and 2021, respectively, and the Company let the licenses lapse.
In August of 2017, the Company purchased a 26-acre parcel in Lebanon, Linn County, Oregon for $510,000 on which we intended to construct a Greenhouse Grow and Production Facility (the “Property”) and filed for OLCC licensure. In August of 2022, the Company entered into an agreement (the “CVC Agreement”) with CVC International, Inc. (“CVC”), an institutional investor who holds certain of the Company’s Convertible Promissory Notes (the “Notes”), one of which was secured by a $500,000 mortgage on the Property. CVC released its lien on the Property to enable the Company to sell the Property and utilize the proceeds therefrom for the benefit of the Company and its shareholders, without having to repay CVC the $500,000 Note held by CVC. Additionally, CVC agreed to advance certain sums against the sale of the Property (“Advances”), which amounted to $270,000 pending the sale of the Property. On February 28, 2023 we sold the Property for a price of $769,500, less commissions and customary closing costs. The net proceeds of the sale were used to repay the advances plus interest (including an additional $100,000 borrowed from another lender interest) and the Company realized net proceeds of approximately $302,000,000. The land is reflected on the balance sheet as assets held for sale for the year ended December 31, 2022 at a value of $516,076. The land was sold in 2023.
On September 26, 2019, the Company formed the majority owned subsidiary Kaya Brands International, Inc. (“KBI”) to serve as the Company’s vehicle for expansion into worldwide cannabis markets. Between September of 2019 and March 31, 2024 KBI has formed majority-owned subsidiaries in both Greece and Israel and its local operating subsidiaries have acquired interests in various licenses and entities.
On December 13, 2022, the Company formed Fifth Dimension Therapeutics ™ (“FDT”, a Florida Corporation) to seek to provide psychedelic services to sufferers of treatment resistant mental health diseases such as depression, PTSD and other mental health disorders. On January 3, 2023 the Oregon Health Authority (the “OHA”) began to accept license applications, allowing each entity to own and operate one (1) Psilocybin manufacturing and processing facility for the production of Psilocybin Mushrooms and derived therapeutics (“Psilocybins”), and up to five (5) Psilocybin Facilitation Centers where clients would go to ingest Psilocybins and experience effects under the supervision of State Licensed Facilitators.
On January 25, 2023, the Company confirmed that attorney Glenn E.J. Murphy was welcomed as a founding member to the FDT Board of Directors. Glenn will assist FDT with introductions to pharmaceutical companies seeking data and access to psychedelic patients, as well as advising on the development of intellectual property, structure of potential joint ventures, funding opportunities, acquisitions, and other related endeavors. Glenn has twenty-five years of private and corporate practice, including ten years in-house with the Henkel Group and more than fifteen years in private practice, Glenn's experience has touched on most every aspect of intellectual property practice.
On March 13, 2023, Bryan Arnold (one of KAYS Vice Presidents and its longest serving Oregon Employee) completed his OHA Certified Psilocybin Education through the Changra Institute and became one of the first eighteen graduates to obtain Psilocybin Facilitator certification in the State of Oregon. Bryan’s Facilitation License application has been approved by the OHA, and he now may oversee up to five (5) Psilocybin Treatment Facilities and up to one (1) Psilocybin Production Facility. Additionally, the Company expects to enroll additional potential licensee candidates within the coming months to bolster its ranks of OHA Licensed Psilocybin Facilitators as it moves forward with plans to open its first Psilocybin Clinic, subject to completion of financing and regulatory approvals.
On November 14, 2023, the Company filed a license application with the Oregon Department of Health (the “OHA”) for the licensure of The Sacred Mushroom™, an approximately 11,000 square foot psilocybin treatment center located in Portland, Oregon which would serve as the Company’s flagship psilocybin facility.
F-8
On March 6, 2024, the OHA completed its Psilocybin Service Center License Inspection and itemized three (3) facility structural/layout items that they wanted addressed/modified prior to issuing the facility license. On May 7, 2024, the Company had been awarded its license by the Oregon Health Authority to operate its Portland, Oregon psilocybin treatment center, The Sacred Mushroom. On July 2, 2024, the Company announced that its licensed psilocybin treatment center, The Sacred Mushroom would open for business on July 5, 2024 and immediately commencing begin administering psilocybin treatments to eligible guests.
During the first half of 2024, the Company ceased operations of its retail marijuana business, MJAI, which was previously its primary revenue-generating subsidiary. MJAI's operations were discontinued during the six months ended June 30, 2024, and no revenue or operating activity has occurred since that date. The retail store was fully closed following the cessation of operations, and the Company no longer maintains involvement in or influence over MJAI’s business activities.
As a result of the closure of MJAI’s retail cannabis operations during the first half of 2024, those operations have been classified as a discontinued operation in accordance with ASC 205-20. The Company retains ownership of MJAI, and its assets and liabilities remain consolidated. Only revenues and direct expenses related to MJAI’s retail operations are included in discontinued operations. See Note 4 for further details.
NOTE 2 – LIQUIDITY AND GOING CONCERN
The Company’s consolidated financial statements as of December 31, 2024 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. The Company incurred net loss of $2,080,856, for the year ended December 31, 2024 and net income of $1,609,697 for the year ended December 31, 2023. The net loss due to the close of a retail shop in Oregon as the company focused on moving our cannabis business overseas and concentrated on the development of our Psychedelic Medicine business and the launch of The Sacred Mushroom™ facility in Portland, Oregon. At December 31, 2024 the Company has a working capital deficiency of $8,035,323 and is totally dependent on its ability to raise capital. The Company has a plan of operations and acknowledges that its plan of operations may not result in generating positive working capital in the near future. Even though management believes that it will be able to successfully execute its business plan, which includes third-party financing and capital issuance, and meet the Company’s future liquidity needs, there can be no assurances in that regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this material uncertainty. Management recognizes that the Company must generate additional funds to successfully develop its operations and activities. Management plans include:
| • | the sale of additional equity and debt securities, |
| • | alliances and/or partnerships with entities interested in and having the resources to support the further development of the Company’s business plan, |
| • | business transactions to assure continuation of the Company’s development and operations, |
| • |
development of a unified brand and the pursuit of licenses to operate recreational and medical marijuana facilities under the branded name.
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NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
F-9
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates.
Risks and Uncertainties
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at other locations where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Kaya Holdings, Inc. and all wholly and majority-owned subsidiaries. All significant intercompany balances have been eliminated.
Majority-owned subsidiaries:
Fifth Dimension Therapeutics, Inc. (a Florida Corporation)
FDT Oregon 1, LLC (an Oregon limited liability company)
Kaya Brands International, Inc. (a Florida Corporation)
Kaya Shalvah (“Kaya Farms Israel”, an Israeli corporation) majority owned subsidiary of KBI)
Kaya Farms Greece, S.A. (a Greek Corporation) majority owned subsidiary of KBI)
Marijuana Holding Americas, Inc. (a Florida Corporation)
MJAI Oregon 1 LLC
Non-Controlling Interest
The company owned
The company owned
F-10
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents.
Inventory
Inventory consists of finished goods purchased,
which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company
periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated
changes in future demand. Total Value of Finished goods inventory as of December 31, 2024 is $
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Depreciation of property and equipment
is provided utilizing the straight-line method over the estimated useful lives, ranging from
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.
Long-lived assets
The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flow.
Accounting for the Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, the recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets.
Operating Leases
We lease our retail stores under non-cancellable operating leases. Most store leases include tenant allowances from landlords, rent escalation clauses and/or contingent rent provisions. We recognize rent expense on a straight-line basis over the lease term, excluding contingent rent, and record the difference between the amount charged to expense and the rent paid as a deferred rent liability.
Deferred Rent and Tenant Allowances
Deferred rent is recognized when a lease contains fixed rent escalations. We recognize the related rent expense on a straight-line basis starting from the date of possession and record the difference between the recognized rental expense and cash rent payable as deferred rent. Deferred rent also includes tenant allowances received from landlords in accordance with negotiated lease terms. The tenant allowances are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession.
F-11
Deferred rent is recognized when a lease contains fixed rent escalations. We recognize the related rent expense on a straight-line basis starting from the date of possession and record the difference between the recognized rental expense and cash rent payable as deferred rent. Deferred rent also includes tenant allowances received from landlords in accordance with negotiated lease terms. The tenant allowances are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.
ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
We are subject to certain tax risks and treatments that could negatively impact our results of operations
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly, and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
Provision for Income Taxes
We recorded a provision for income taxes in the amount
of $
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
| • | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. |
| • | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
F-12
| Schedule of fair value assets and liabilities | ||||||
| Fair Value Measurements at December 31, 2024 | ||||||
| Assets | Level 1 | Level 2 | Level 3 | |||
| Cash | $ |
$ - | $ - | |||
| Total Assets | |
- | - | |||
| Liabilities | ||||||
| Convertible debentures, net of discounts of $ |
- | - | | |||
| Derivative liabilities | - | - | | |||
| Total liabilities | - | - | | |||
| Total | $ |
$ - | $ ( | |||
| Fair Value Measurements at December 31, 2023 | ||||||
| Assets | Level 1 | Level 2 | Level 3 | |||
| Cash | $ |
$ - | $ - | |||
| Total Assets | |
- | - | |||
| Liabilities | ||||||
| Convertible debentures, net of discounts of $ |
- | - | | |||
| Derivative liabilities | - | - | | |||
| Total liabilities | - | - | | |||
| Total | $ |
$ - | $ ( | |||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 11.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Binomial option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
In July 2017, the FASB issued ASU 2017-11 Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivative and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendment also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.
F-13
Prior to this Update, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
In August 2020, the FASB issued ASU 202006, Debt-Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 81540): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. In this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated. The guidance allows for either full retrospective adoption or modified retrospective adoption. The guidance is effective for the Company in the first quarter of fiscal year 2025 and early adoption is permitted. The Company is evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements and related disclosures.
The amendments in Part 1 of this Update are a cost savings relative to former accounting. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.
The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.
The Company adopted this new standard on January 1, 2019; however, the Company needs to continue the derivative liabilities due to variable conversion price on some of the convertible instruments. As such, it did not have a material impact on the Company’s consolidated financial statements.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded as a debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Extinguishments of Liabilities
The Company accounts for extinguishments of liabilities in accordance with ASC 405-20 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized.
F-14
Stock-Based Compensation - Employees
The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
The fair value of share options and similar instruments is estimated on the date of grant using a Binomial Option Model option-pricing valuation model. The ranges of assumptions for inputs are as follows:
| • |
Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
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Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
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Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
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Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
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F-15
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest.
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations.
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvement to Nonemployee Share-Based Payment Accounting (Topic 718). The ASU supersedes ASC 505-50, Equity-Based Payment to Non-Employment and expends the scope of the Topic 718 to include stock-based payments granted to non-employees. Under the new guidance, the measurement date and performance and vesting conditions for stock-based payments to non-employees are aligned with those of employees, most notably aligning the award measurement date with the grant date of an award. The new guidance is required to be adopted using the modified retrospective transition approach. The Company adopted the new guidance effective January 1, 2019, with an immaterial impact on its financial statements and related disclosures.
The fair value of share options and similar instruments is estimated on the date of grant using a Binomial option-pricing valuation model. The ranges of assumptions for inputs are as follows:
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Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
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Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
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Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
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Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
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Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identifying the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
To confirm, all of our OLCC licensed cannabis retail sales operations are conducted and operated on a “cash and carry” basis- product(s) from our inventory accounts are sold to the customer(s) and the customer settles the account at time of receipt of product via cash payment at our retail store; the transaction is recorded at the time of sale in our point-of-sale software system. Revenue is only reported after the product has been delivered to the customer and the customer has paid for the product with cash.
To date the only other revenue we have received is for ATM transactions and revenue from this activity is only reported after we receive payment via check from the ATM service provider company.
F-16
Cost of Sales
Cost of sales represents costs directly related to the purchase of goods and third party testing of the Company’s products.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended December 31, 2024.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.
F-17
Segment reporting
The Company operates as one segment, in which management uses one measure of profitability, and all of the Company’s long-lived assets and all of the revenues generated are primarily located in the United States of America. The Company does not operate separate lines of business or separate business entities with respect to any of its product candidates. Accordingly, the Company does not have separate reportable segments.
Discontinued operation
During the six months ended June 30, 2024, the Company ceased operations of its wholly owned subsidiary, MJAI, a retail marijuana dispensary based in Oregon. MJAI focuses on legal recreational and medical marijuana retaliation business. The Company evaluated the evolving trends and economic realities of the marijuana market, taking into consideration the purchase cost and market demand. The Company has determined that there is insufficient profit to be made in the marijuana business. Consequently, the Company took the decision to discontinue MJAI's business activities.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.
Recently issued accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
Recently adopted accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. Refer to Note 16, Segment Reporting and Information about Geographic Areas for the inclusion of the new required disclosures.
F-18
NOTE 4 – DISCONTINUED OPERATIONS
During the six months ended June 30, 2024, the Company ceased operations of its wholly owned subsidiary, MJAI, a retail marijuana dispensary based in Oregon. MJAI focuses on legal recreational and medical marijuana retaliation business. The Company evaluated the evolving trends and economic realities of the marijuana market, taking into consideration the purchase cost and market demand. The Company has determined that there is insufficient profit to be made in the marijuana business. Consequently, the Company took the decision to discontinue MJAI's business activities.
While the Company did not formally sell the MJAI business during the year ended December 31, 2024, operations were effectively discontinued during the second quarter of 2024, and the dispensary has remained closed since that time. Kaya has had no further operating activity or income from MJAI following the closure.
The Company plans to pursue a potential sale of the MJAI business and remaining assets in the first quarter of 2025. As a result of the closure and strategic shift in operations, the MJAI segment is considered a discontinued operation as defined under ASC 205-20, Presentation of Financial Statements – Discontinued Operations. The Company retains ownership of MJAI, and its assets and liabilities remain consolidated in the financial statements. The results of MJAI’s operations have been presented separately from continuing operations for all periods presented in the accompanying consolidated financial statements.
The following table presents the summary of operating results from discontinued operations for the year ended December 31, 2024, and 2023:
Marijuana Holdings Americas, Inc.
Consolidated Statements of Operations
| Schedule of of operating results from discontinued operations | ||||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain on impairment of right of use assets | ||||||||
| Gain on sale of the license | ||||||||
| AP forgiveness | ||||||||
| Other income (expense) | ( | ) | ||||||
| Total other income (loss) | ||||||||
| Net income from discontinued operations before income taxes | ( | ) | ||||||
| Provision for Income Taxes | ( | ) | ( | ) | ||||
| Net income (loss) from discontinued operations | ( | ) | ||||||
Although MJAI’s operations ceased during the year 2024, the Company retained control of the subsidiary as of December 31, 2024. Accordingly, MJAI was not deconsolidated, and its assets and liabilities remain included in the Company’s consolidated balance sheet as of December 31, 2024 and 2023.
Cash Flow Disclosures from Discontinued Operations
For the years ended December 31, 2024 and 2023, the
MJAI discontinued operation had net cash used in operating activities of $
F-19
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 2024 and December 31, 2023:
| Schedule of property, plant and equipment | ||||||||
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Vehicle | $ | $ | ||||||
| Computers | ||||||||
| Machinery and Equipment | ||||||||
| Furnitures and Fixture | ||||||||
| HVAC | ||||||||
| Land | ||||||||
| Leasehold improvements | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense totaled $
NOTE 6 – NON-CURRENT ASSETS
Other assets consisted of the following at December 31, 2024 and December 31, 2023:
| Schedule of other assets | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Other receivable | ||||||||
| Rent deposits | ||||||||
| Security deposits | ||||||||
| Total Non-current assets | ||||||||
During the year ended December 31, 2024,
our other receivables decreased $
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The accounts payable and accrued expenses consisted of the following at December 31, 2024 and December 31, 2023:
| Schedule of accounts payable and accrued expenses | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total | ||||||||
NOTE 8 – CONVERTIBLE DEBT
These debts have a price adjustment provision. Therefore,
the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the
obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have
been amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible
note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from
F-20
See Below Summary Table
| Schedule of of convertible debt | |||||||
| Convertible Debt Summary | |||||||
| Debt Type | Debt Classification | Interest Rate | Due Date | Ending | |||
| CT | LT | 12/31/2024 | 12/31/2023 | ||||
| A | Convertible | X | $ |
$ | |||
| B | Convertible | X | |
| |||
| C | Convertible | X | |
| |||
| D | Convertible | X | |
| |||
| O | Convertible | X | |
| |||
| P | Convertible | X | |
| |||
| Q | Convertible | X | |
| |||
| S | Convertible | X | |
| |||
| T | Convertible | X | |
| |||
| CC | Convertible | X | |
| |||
| KK | Convertible | X | |
| |||
| LL | Convertible | X | |
| |||
| MM | Convertible | X | |
| |||
| NN | Convertible | X | |
| |||
| OO | Convertible | X | |
| |||
| PP | Convertible | X | |
| |||
| Convertible | X | |
| ||||
| RR | Convertible | X | |
| |||
| SS | Convertible | X | |
| |||
| TT | Convertible | X | |
| |||
| UU | Convertible | X | |
| |||
| VV | Convertible | X | |
| |||
| XX | Convertible | X | |
| |||
| YY | Convertible | X | |
| |||
| ZZ | Convertible | X | |
| |||
| AAA | Convertible | X | |
| |||
| BBB | Convertible | X | |
| |||
| DDD | Convertible | X | |
| |||
| EEE | Convertible | X | |
| |||
| GGG | Convertible | X | |
| |||
| JJJ | Convertible | X | |
| |||
| LLL | Convertible | X | |
| |||
| MMM | Convertible | X | |
| |||
| PPP | Convertible | X | |
| |||
| SSS | Convertible | X | |
| |||
| TTT | Convertible | X | |
| |||
| VVV | Convertible | X | |
| |||
| WWW | Convertible | X | |
| |||
| XXX | Convertible | X | |
| |||
| YYY | Convertible | X | |
| |||
| ZZZ | Convertible | X | |
| |||
| AAAA | Convertible | X | |
| |||
| EEEE | Convertible | X | |
- | |||
| FFFF | Convertible | X | |
- | |||
| GGGG | Convertible | X | |
- | |||
| HHHH | Convertible | X | |
- | |||
| IIII | Convertible | X | |
- | |||
| JJJJ | Convertible | X | |
- | |||
| KKKK | Convertible | X | |
- | |||
| LLLL | Convertible | X | |
- | |||
| MMMM | Convertible | X | |
- | |||
| NNNN | Convertible | X | |
- | |||
| Total Convertible Debt | |
| |||||
| Less: Discount | ( |
( | |||||
| Convertible Debt, Net of Discounts | $ |
$ | |||||
| Convertible Debt, Net of Discounts, Current | $ |
$ | |||||
| Convertible Debt, Net of Discounts, Long-term | $ |
$ | |||||
F-21
On February 28, 2023, the Company sold the Property for a price of $769,500, less commissions and customary closing costs. The net proceeds of the sale were used to repay the convertible notes described above, of which total principal was $370,000. On December 31, 2022, the Company and various noteholders agree to modify the maturity date to December 31,2026 of all notes that were due to mature on December 31, 2024. No other terms of the convertible notes were changed.
On January 23, 2024, the Company received $61,200 from selling 2.4 units to CVC International LTD, including $60,000 convertible debt and 120,000 FDT shares at $0.01 per share and total value was $1,200. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On January 31, 2024, the Company signed an agreement with a third-party individual to transfer one non-convertible promissory note, including $15,000 principal and $300 accrual interest to purchase 0.6 unit, which included $15,000 convertible note and 30,000 FDT shares which is $0.01 per share and total value was $300. The convertible notes interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On March 12, 2024, the Company received $150,000 from selling 6 units to CVC International LTD, including $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On March 15, 2024, one of a promissory non-convertible notes was expired. The Company signed a purchase agreement with this third-party individual to purchase 4.3 units using the matured note, including $100,000 principal and $96,500 accrual interest. The 4.3 units included $107,500 convertible note and 215,000 FDT shares which is $0.01 per share and total value was $2,150. The convertible notes interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On May 1, 2024, the Company received $130,000 deposit plus $23,000 accrued interest reinvest from selling 6 units to CVC International LTD. The 6 units included $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
F-22
On June 4, 2024, the Company received $150,000 deposit plus $3,000 accrual interest reinvest from selling 6 units to CVC International LTD. The 6 Units included $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On July 22, 2024, the Company received $125,000 deposit plus $53,000 accrual interest and principal reinvest from selling 7 units to CVC International LTD. The 7 Units included $175,000 convertible debt and 350,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On September 13, 2024, the Company received $125,000 deposit plus $130,000 accrual interest and principal reinvest from selling 10 units to CVC International LTD. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On October 29, 2024, the Company received $125,000 deposit plus $130,000 accrual interest and principal reinvest from selling 10 units to CVC International Ltd. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Additionally, this note has a one-time conversion price adjustment of $0.02 per share for the first $1,000,000 principal and/or accumulated interest converted by CVC or their assigns. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On December 4, 2024, the Company received $100,000 deposit plus $155,000 accrual interest and principal reinvest from selling 10 units to CVC International Ltd. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Additionally, this note has a one-time conversion price adjustment of $0.02 per share for the first $1,000,000 principal and/or accumulated interest converted by CVC or their assigns. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On July 31, 2024, the Company entered into a convertible notes modification agreement with CVC to extend the due date to December 31, 2026.
F-23
NOTE 9 – NON-CONVERTIBLE DEBT
| Schedule of nonconvertible debt | ||||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Current non-convertible notes | ||||||||
| Non-current non-convertible notes | ||||||||
| Total non-convertible notes | $ | $ | ||||||
| Breakdown | ||||||||
| Note a | $ | $ | ||||||
| Note b | ||||||||
| Note c | ||||||||
| Note d | ||||||||
| Total non-convertible notes | ||||||||
(a) On September 16, 2016, the Company received a total of $31,661 to be used for equipment in exchange for a two year note in the aggregate amount of $31,661 with interest accruing at 18% per year and a 10% loan fee. The note is in default as of December 31, 2024 with an outstanding balance of $9,312.
(b) On June 12, 2023, the Company issued a 10% promissory note in the amount of $350,000 with 10% interest rate, payable to CVC International Ltd, secured by 10% of monthly total revenues from all sources of Kaya Holdings, Inc. and any of its subsidiaries. and the noteholder also received 10 Series A preferred shares in FDT, which are convertible into a total of 10% of the common shares. The due date of the note is June 12, 2025. At the end of September 2023, the company paid $5,000, which is 10% of the total revenues from all sources of Kaya Holdings, Inc to the Holder and the Holder agreed to reinvest it as the additional of the note. On October 6, 2023, the Company received another $145,000 from the same investor to increase the promissory note to $500,000 total. As of September 30, 2024, Cayman Venture Capital Fund reinvested $29,000 of accrued interest from promissory notes into convertible notes and FDT stock purchases. In connection with this reinvestment, the Fund executed three convertible promissory notes, each with a principal amount of $150,000, and received a total of 900,000 FDT shares. On July 22, 2024, $16,975 of accrued interest and $36,025 of principal were reinvested into an additional 10 units, which included $175,000 of convertible debt and 350,000 FDT shares. On September 13, 2024, $6,730 of accrued interest and $123,270 of principal were reinvested into an additional 10 units, which included $250,000 of convertible debt and 500,000 FDT shares. On October 29, 2024, $4,288 of accrued interest and $125,712 of principal were reinvested into an additional 10 units, which included $250,000 of convertible debt and 500,000 FDT shares. On December 4, 2024, $2,116 of accrued interest and $152,884 principal was reinvested into an additional 10 units, which included $250,000 convertible debt and 500,000 FDT shares. As of December 31, 2024, the outstanding balance of the note is $61,608.
(c) On August 28, 2023, the Company received $100,000 from the issuance of working capital loan to another investor. Interest is stated at 10%. The Note was matured on March 31, 2024 and the $100,000 principal and $9,650 accrual interest were transferred to $107,500 convertible note and $2,150 stocks of FDT.
(d) On December 15, 2023, the Company received $15,000 working capital loan from another investor. On January 31, 2024, the Company signed a purchase agreement with the investor to reclass the $15,000 principal to convertible note and $300 accrual interest to purchase 30,000 FDT shares.
| Schedule of related party transactions | ||||||||
| Related Party | ||||||||
| Loan payable - Stockholder, 0%, Due December 31, 2027 (1) | $ | $ | ||||||
| $ | $ | |||||||
| (1) |
F-24
NOTE 10 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has shares of preferred stock authorized with a par value of $, of which shares have been designated as Series C convertible preferred stock (“Series C” or “Series C preferred stock”). The Board has the authority to issue the shares in one or more series and to fix the designations, preferences, powers and other rights, as it deems appropriate.
Each share of Series C has
Pursuant to the terms and conditions of this
Agreement, the Holders each agreed to
Each Share of Series D Preferred Stock is convertible, at the option of the holder thereof, at any time and from time to time, into one percent (1%) of the Company’s Fully Diluted Capitalization as of the Conversion Date.
Common Stock
On August 20, 2024, the Company filed an amendment to its Certificate of Incorporation with the Delaware Secretary of State increasing the number of shares of common stock that the Company is authorized to shares and the par value changed to $. Each share of common stock has one vote per share for the election of directors and all other items submitted to a vote of stockholders. The common stock does not have cumulative voting rights, preemptive, redemption or conversion rights.
On September 5, 2024, the Board of Directors approved
the issuance of shares of common stock to various individuals for services rendered to the Company. The shares were issued in
accordance with Rule 144. The shares were valued at the market price of $
On September 5, 2024, the Board of Directors approved
the issuance of shares of common stock to the officers and directors. And another shares of common stock issued to
FDT Oregon 1 LLC owners who are also the Company’s related parties to acquire
As of December 31, 2024, there were shares of common stock outstanding and shares subscription payable.
Treasury Stock
As of December 31, 2024, the Company held shares of its own common stock as treasury stock, which are recorded at cost using the cost method in accordance with ASC 505-30, Treasury Stock. These shares were originally issued in 2015 as part of a consulting agreement and were returned to the Company in 2016 pursuant to a settlement agreement with the service provider.
Although the shares were returned in 2016, they were
not previously recorded as treasury stock. Upon review during the preparation of the 2024 financial statements, the Company determined
that these shares should be properly reflected as issued but not outstanding. Accordingly, as of December 31, 2024 and 2023, shares
are reported as treasury stock, with a total recorded cost of $
F-25
NOTE 11 – DERIVATIVE LIABILITIES
Effective January 1, 2019, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
However, due to a recognition of tainting,
due to variable conversion price on some of the convertible notes, all convertible notes are considered to have a derivative liability,
therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component
of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts
are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible
note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt is summarized as follows:
| Schedule of ratchet feature related to convertible debt | ||||
| Balance as of December 31, 2023 | $ | |||
| Change in Derivative values | ( | ) | ||
| Initial derivative | ||||
| Balance as of December 31, 2024 | $ |
The Company recorded the debt discount to the extent of the gross proceeds raised and expanded immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.
The Company recorded initial derivative liabilities
of $
The Company recorded a change in the value of embedded
derivative liabilities gain of $
The Company reclassified derivative liabilities of
$
NOTE 12 – DEBT DISCOUNT
The Company recorded the debt discount to the extent of the gross proceeds raised and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.
Debt discount amounted to $
The Company recorded the amortization of debt discount of $
F-26
NOTE 13 – RELATED PARTY TRANSACTIONS
At December 31, 2014, the Company was indebted to
an affiliated shareholder of the Company for $, which consisted of $ principal and $ accrued interest, with interest
accruing at %. On January 2, 2014, the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced
to $
In 2019, the Company entered into amended
consulting agreements with Tudog International Consulting, Inc. which provides CEO services to the Company through Craig Frank, an Officer
of the Company and BMN Consultants, Inc. which provides business development and financial consulting services to the Company through
William David Jones, a non-officer Consultant to the Company. Pursuant to the amended consulting agreements, each entity is entitled to
monthly compensation of $
On July 28, 2021, the Company announced that
all terms had been satisfied. Pursuant to the terms of the settlement, Bruce Burwick surrendered to KAYS shares of our common
stock issued to him in connection with the transaction (
In 2023, The Tudog Group, BMN Consultants, Inc,
Inc and 495 Oxford Consulting, Inc which all provide services to the Company through Craig Frank and William David Jones, forgiven totally
$
On September 5, 2024, the Board of Directors approved the issuance of shares of common stock to FDT Oregon 1 LLC owners who are also the Company’s related party to acquire equity interest of FDT Oregon 1 LLC.
On September 15, 2022, the Company approved the 2022 Equity Incentive Plan, which provides for equity incentives to be granted to the Company’s employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2022 Incentive Stock Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The 2022 Incentive Stock Plan is administered by the board of directors. The remaining balance of the shares available in the plan is shares.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company has several operating leases for an office in Fort Lauderdale, Florida, the Sacred Mushroom Psilocybin Service Center in Portland, Oregon, an apartment used by Officers and Consultants for the Company in Portland, Oregon when they are working in Portland and one retail store locations in Oregon under arrangements classified as leases under ASC 842.
Effective June 1, 2019,
Effective May 15, 2014,
F-27
On September 21, 2023,
The Company has escrowed $
The Company has right-of-use assets of
$
Rent expenses for the year ended December
31, 2024 and 2023 were $
| Schedule of future minimum rental payments for operating leases | ||
| Maturity of Lease Liabilities at December 31, 2024 | ||
| Amount | ||
| 2025 | | |
| 2026 | ||
| Total lease payments | ||
| Less: Imputed interest | ( | |
| Present value of lease liabilities | $ | |
| Schedule of operating lease assets and liability | |||||
| Operating Lease Liability | Remaining months | Weighted average | |||
| As of December 31, 2024 | remaining term-months | ||||
| |
|
||||
| |
|||||
Legal Proceedings
On October 17, 2024, the Company reached a settlement agreement with
P3 Distributing L.L.C. in connection with a lawsuit filed in the Marion County Circuit Court, Case No. 24CV08588. Under the terms of the
settlement, the Company is required to make monthly payments of $
F-28
Note 16 - SEGMENT REPORT
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company concluded that the Company’s CODM is CEO.
In accordance with ASC 280-10, Segment Reporting: Overall, the CODM reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Group as a whole; hence, the Company has only one operating segment.
As disclosed in Note 4 of the consolidated financial statements, during the six months ended June 30, 2024, we ceased operations of our MJAI retail marijuana business, which had historically represented our primary operating segment. Following the closure of MJAI, we received no additional income from the business and no longer engage in any operating activity related to that segment. Although the Company has retained full ownership of MJAI as of December 31, 2024, we intend to pursue the sale of MJAI and its related assets in the first quarter of 2025.
| Schedule of segment revenue, segment profit or loss, and significant segment expenses | ||||||||
| For Years ended December 31, 2024 | For Years ended December 31, 2023 | |||||||
| Gross Profit | ( | ) | ||||||
| Less: | ||||||||
| Professional fees | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Interest expense | ||||||||
| Amortization of debt discount | ||||||||
| Change in derivative liabilities expense | ( | ) | ( | ) | ||||
| Other Segment Items(a) | ( | ) | ( | ) | ||||
| Segment Net profit | ( | ) | ||||||
| Reconciliation of profit or loss | ||||||||
| Adjustments and reconciling items | ||||||||
| Provision for Income Taxes | ||||||||
| Net income (loss) from discontinued operations | ( | ) | ||||||
| Net income (loss) attributed to non-controlling interest | ( | ) | ||||||
| Consolidated net income | $ | ( | ) | $ | ||||
| (a) |
NOTE 17 - INCOME TAXES
We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024, and 2023 we have not recorded any uncertain tax positions in our financial statements.
The effective US Federal Income Corporate Tax Rates for 2024 and 2023 are
The Company has net operating loss carry forwards
of approximately $
The Company has a deferred tax asset as shown in the following:
| Schedule of deferred tax asset | ||||||||||||||||||||||||||||
| Year Ending December 31, 2024 | Year Ending December 31, 2023 | |||||||||||||||||||||||||||
| Deferred Tax Asset | ||||||||||||||||||||||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net Deferred Tax Asset | ||||||||||||||||||||||||||||
F-29
We are subject to certain tax risks and treatments that could negatively impact our results of operations
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
Provision for Income Taxes
We recorded a provision for income taxes in the amount of $
Note 18 - SUBSEQUENT EVENTS
Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Subsequent events, which provide evidence about conditions that existed after the balance sheet date, require disclosure in the accompanying notes. The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued, and advised of the following:
As of May 29, 2025 the Institutional Investor has delivered an additional $235k to the Company which is being applied to the purchase of a convertible promissory note. Interest on the note accrues at the rate of 10% per annum. The note and accrued interest is convertible at any time prior to maturity (December 31, 2026) at the option of the Institutional Investor into shares of the Company’s common stock, at a conversion price of $0.08 per share.
In addition to customary adjustments, for stock splits, stock dividends and other recapitalization events, the conversion price and number of shares issuable upon conversion of the note is subject to adjustment if the market price of the Company’s common stock 20 days before notice of conversion is given is less than $0.16 per share, in which case, the conversion price would be adjusted to the lesser of 50% of the average closing price or the historical price for the 20 trading days before receipt of the conversion notice, but in no event, less than $0.02 per share or more than $0.08 per share.
In the event that the Maker completes an issuance or sale of common stock of the Company at a price lower than the Conversion Price any time before this Note is repaid or converted into common stock of the Company (whether via an acquisition transaction, debt conversion, a bona fide public offering, or a sale of restricted stock or any other form of exemption available to the Company) then the Exercise Price of the option shall be adjusted to that price for the remaining term of the Note.
Additionally, in the event that the Maker completes an issuance or sale of Preferred Shares, Debt, etc. (the "Other Debt Or Securities")or securities of one of its subsidiaries, then the Payee shall have the right to convert the Note into the Other Debt Or Securities, or securities of one of its subsidiaries on the same terms as those offered to any other investor using any Balance Due owed to Payee at that time.
F-30
Exhibit 14.1
CERTIFICATION
KAYA HOLDINGS, INC.
Insider Trading Compliance Program
And
Insider Trading Policy
Acknowledgement Page
I have received, read, understand and agree to comply with the Kaya Holdings, Inc. Insider Trading Compliance Program including the Insider Trading Policy, which is attached thereto as Appendix I to the accompanying Memorandum from our Chairman and Chief Executive Officer.
Name
Signature
Date
Insider Trading Reminders
Before trading in the securities of Kaya Holdings, Inc. (the “Company”) or discussing Company matters with outsiders, remember:
| 1. | Upon commencement of your services to the Company, you have agreed to maintain the confidentiality of the Company’s information. You should treat all information you learn about the Company or its business plans in connection with your employment or services as confidential and proprietary to the Company. Inadvertent disclosure of confidential or inside information may expose the Company and you to significant risk of investigation and litigation. |
| 2. | It is against the United States federal and state laws to buy or sell Company securities, or to give tips to others regarding Company securities, when you may possess Material Nonpublic Information about the Company, or the selective disclosure of such information to others who may trade on such information. |
| 3. | The Material Nonpublic Information you cannot trade on or tip is any information that could be expected to have a substantial effect on the stock price, either positively or negatively. |
| 4. | As an essential part of your work, many of you have access to Material Nonpublic Information (as defined in the Kaya Holdings, Inc. Insider Trading Policy) about the Company or about the Company’s business (including potential transactions and/or sales with other businesses). As such, no director, officer, employee or relative of such person who has Material Nonpublic Information relating to the Company, may buy or sell securities of the Company, directly or indirectly, or engage in any other action to take personal advantage of that information, or pass on such information to others. This applies to information relating to any other company, including acquirers, customers or suppliers, obtained in the course of providing services to the Company. This restriction also applies to your family members and others living in your household. |
| 5. | You must not pass insider information on to others, including family members and others living in your household or friends and casual acquaintances or to anyone on the internet or social media. Employees and service providers are expected to be responsible for the compliance of their immediate family and others living in their households. The above penalties apply whether or not you derive any benefit from another’s actions. |
| 6. | Once the information is publicly disclosed, the Company’s Trading Windows (as defined in the Kaya Holdings, Inc. Insider Trading Policy) apply. |
| 7. | These same rules apply to any information you learn on the job about another public company. |
| 8. | Except where required in the performance of your job as a Company forum moderator or administrator, you are prohibited from posting information on social media, or to Internet chat rooms or bulletin boards, that concern the Company and any business of the Company. |
.
MEMORANDUM
| TO: | All Kaya Holdings, Inc. Directors, Officers, Employees and Consultants |
FROM: Craig Frank
Chairman and Chief Executive Officer
RE: Prohibition Against Insider Trading and Confidentiality Obligations
______________________________________________________________________________
This memorandum is intended to inform all directors, officers, employees and consultants of Kaya Holdings, Inc., its affiliates and subsidiaries (collectively, the “Company”) of the Company’s policy against “insider trading” and to remind employees of the importance of maintaining the confidentiality of sensitive Company information.
It is against Company policy and against the law for any employee, consultant or any other person associated with the Company or its employees to trade in common stock or other securities of the Company while possessing Material Nonpublic Information (defined below) about the Company.
A violation of the laws against insider trading by individuals can lead to a civil penalty of up to three (3) times the profit gained or loss avoided, criminal prosecution resulting in prison terms of up to twenty (20) years and monetary penalties of up to $5,000,000 for individuals. A violation by the Company (including its directors, officers, supervisors and the relatives of such individuals) can lead to a civil penalty of up to $1,000,000 and a criminal penalty of up to $25,000,000 (for corporations). A violation of the Company’s policy can also result in immediate termination.
Many employees and consultants have access to Material Nonpublic Information about the Company at one time or another. “Material Nonpublic Information” is information that is not available to the public but which an investor might consider important in deciding whether to buy, hold or sell the Company’s securities. Material Nonpublic Information could include, for example, anticipated quarterly or annual financial and operational results, revenue projections, discussions of a potential acquisition, a significant transaction or contract with a vendor, customer, or other business partner or significant announcements regarding new products or changes for existing products.
In the event you possess Material Nonpublic Information, you should not trade in securities of the Company until the Company has publicly announced the information by press release or similar means, and the information has been available to the public for two (2) full business days.
You should also be careful not to disclose Material Nonpublic Information to anyone outside the Company, or to anyone within the Company without a need to know. It is important to maintain the confidentiality of sensitive information in order to protect the Company’s trade secrets and other information that could benefit our competitors. It is also prudent from the perspective of your potential personal liability.
Insider trading laws also apply to any Material Nonpublic Information you may have regarding other companies, including information about our vendors and customers that you might obtain in the course of employment. In the event you hold Material Nonpublic Information regarding another company, you should not trade in securities of that company until that company has publicly disclosed the information for two (2) full business days—ending at the opening of the market on the third (3rd) Trading Day (as defined in the Kaya Holdings, Inc. Insider Trading Compliance Program attached as Appendix 1 to this Memorandum, following the date of public disclosure of the information.
In addition to the foregoing restrictions, directors, officers and certain employees with regular access to particularly sensitive information (as advised by the Company) must preclear all trades in Company securities with the Company’s Chief Financial Officer, who is our Insider Trading Compliance Officer, and are subject to certain other restrictions.
The Company has adopted a detailed policy with respect to these matters. A copy of the policy is attached.
APPENDIX 1
INSIDER TRADING COMPLIANCE PROGRAM
KAYA HOLDINGS, INC.
In order to take an active role in the prevention of insider trading violations by its directors, officers, employees and other related individuals, Kaya Holdings, Inc. (the “Company”) has adopted the policies and procedures described in this document.
Adoption of Insider Trading Policy.
The Company has adopted the Insider Trading Policy attached as Exhibit A hereto (the “Policy”), which prohibits trading based on material nonpublic information regarding the Company (“Material Nonpublic Information”). The Policy covers directors, officers and all other employees of, or consultants or contractors to, the Company, as well as family members of such persons, and others, in each case where such persons have or may have access to Material Nonpublic Information. The Policy (and/or a summary thereof) is to be delivered to all new employees and consultants upon the commencement of their relationships with the Company, and is to be circulated to all employees annually.
Designation of Restricted Persons.
Section 16 Individuals. The Company has determined that those persons listed on Attachment II are directors and officers who will be subject to the reporting and liability provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules and regulations promulgated thereunder (“Section 16 Individuals”) once the Company transitions to a major U.S. stock exchange. Exhibit B will be amended from time to time as appropriate to reflect (i) the election of new directors or officers; (ii) any change in function of current officers; and (iii) the resignation or departure of current directors or officers.
Other Persons. The Company may determine that certain other persons, together with the Section 16 Individuals, should also be subject to the preclearance requirement set forth in Section IV.A. below.
Trading Groups. The Company, from time to time, will determine, for purposes of restricting the trading of the Company’s securities, those individuals who are in possession of Material Nonpublic Information. This determination will be based on the following group definitions:
Group 1: All Section 16 Individuals and those employees who, from time to time, are in possession of Material Nonpublic Information and whose trades are subject to preclearance by the Company’s Insider Trading Compliance Officer.
Group 2: All employees and consultants who are generally not in possession of Material Nonpublic Information.
These trading groups will change, from time to time, based on the Company’s belief that, in the normal course of their duties, such persons have, or are likely to have, regular access to Material Nonpublic Information.
The Company will notify individuals upon commencement of employment or services as to which trading group they are in, and will notify individuals as necessary thereafter in the event that the Company has determined that an individual’s trading group designation should be changed.
Appointment of the Insider Trading Compliance Officer.
The Company has appointed its Chief Financial Officer as the Company’s Insider Trading Compliance Officer.
Duties of the Insider Trading Compliance Officer.
The duties of the Insider Trading Compliance Officer shall include, but not be limited to, the following:
Preclearing all transactions involving the Company’s securities by those individuals falling within Group 1, including Section 16 Individuals, in order to determine compliance with the Policy, insider trading laws, Section 16 of the Exchange Act and Rule 144 promulgated under the Securities Act of 1933, as amended. An individual proposing a transaction should complete the preclearance checklist attached as Exhibit C hereto and submit it to the Insider Trading Compliance Officer for signature.
Assisting in the preparation and filing of Section 16 reports (Forms 3 and 4) for all Section 16 Individuals. Serving as the designated recipient at the Company of copies of reports filed with the Securities and Exchange Commission (the “SEC”) by Section 16 Individuals under Section 16 of the Exchange Act.
Performing periodic cross-checks of available materials, which may include Forms 3 and 4, Form 144, officers and directors’ questionnaires, and reports received from the Company’s transfer agent, to determine trading activity of officers, directors and others who have, or may have, access to Material Nonpublic Information.
Circulating the Policy (and/or a summary thereof) to all employees, including Section 16 Individuals, on a periodic basis, and providing the Policy and other appropriate materials to new officers, directors and others who have, or may have, access to Material Nonpublic Information.
Assisting the Company’s Board of Directors in implementation of the Policy and Sections I and II of this document.
F. The annual training of all directors, officer and employees to review the Company’s Insider Trading Compliance Program, as well as training of all new directors, officers and employees on an on-going basis.
G. Coordinating with counsel regarding compliance activities with respect to Rule 144 requirements and regarding changing requirements and recommendations for compliance with Section 16 of the Exchange Act and insider trading laws to ensure that the Policy is amended as necessary to comply with such requirements.
EXHIBIT A
to
insider trading compliance program
OF
KAYA HOLDINGS, INC.
Insider Trading Policy
and Guidelines with Respect to
Certain Transactions in Company Securities
This insider trading policy (this “Policy”) provides guidelines to directors, officers, employees, consultants, contractors and other related individuals of Kaya Holdings, Inc., its affiliates and subsidiaries (collectively, the “Company”) with respect to transactions in the Company’s securities.
Applicability of Policy
This Policy applies to all transactions in the Company’s securities, including common stock, options for common stock and any other securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company’s stock, whether or not issued by the Company, such as exchange-traded options. It applies to all officers of the Company, all members of the Company’s board of directors, and all employees of, and consultants and contractors to, the Company and its affiliates and subsidiaries (“Covered Persons”) who receive or have access to Material Nonpublic Information (as defined below) regarding the Company. This group of people, members of their immediate families, and members of their households are sometimes referred to in this Policy as “Insiders.” This Policy also applies to any person who receives Material Nonpublic Information from any Insider. Consultants and contract workers are not Company employees, and nothing in this Policy should be construed to the contrary.
Any person who possesses Material Nonpublic Information regarding the Company is an Insider for so long as the information is not publicly known. Any employee, consultant and contractor can be an Insider from time to time, and would, at those times, be subject to this policy.
Statement of Policy
General Policy
It is the policy of the Company to oppose the unauthorized disclosure of any nonpublic information acquired in the workplace and the misuse of Material Nonpublic Information in securities trading.
Specific Policies
Trading on Material Nonpublic Information. No Insider shall engage in any transaction involving a purchase or sale of the Company’s securities, including any offer to purchase or offer to sell, during any period commencing with the date that such Insider first receives Material Nonpublic Information concerning the Company, and ending at the opening of the market on the third (3rd) Trading Day following the date of public disclosure of that information, or at such time as such nonpublic information is no longer material. As used herein, the term “Trading Day” shall mean a day on which national or international stock exchanges and the Nasdaq National Market are open for trading.
Black-Out Period; Trading Windows. The period beginning two (2) weeks prior to the end of quarter (March 31, June 30, September 30, December 31) and ending on the opening of the market on the third (3rd) Trading Day following the date of public disclosure of the financial results for that quarter is a particularly sensitive period of time for transactions in the Company’s stock from the perspective of compliance with applicable securities laws. This sensitivity is due to the fact that Covered Persons will, during that period, often possess Material Nonpublic Information about the expected financial results for the quarter. Accordingly, this period of time is referred to as a “black-out” period. All Covered Persons are prohibited from trading during such period. In addition, from time to time Material Nonpublic Information regarding the Company may be pending. While such information is pending, the Company may impose a special “black-out” period during which the same prohibitions and recommendations shall apply.
Accordingly, to ensure compliance with this Policy and applicable federal and state securities laws, all Covered Persons may only conduct transactions involving the purchase or sale of the Company’s securities on certain days, as set forth in the following table:
Trading Window for All Covered Persons
|
Start: |
End: | |
| Trading Permitted: (the “Trading Window”) |
The opening of the market on the third (3rd) Trading Day following the date of public disclosure of the financial results for a particular calendar quarter or year | Two (2) weeks prior to the end of the quarter (Q1: March 31, Q2: June 30, Q3: September 30 and Q4: December 31) |
| Trading Prohibited: | Two (2) weeks prior to the end of the quarter (Q1: March 31, Q2: June 30, Q3: September 30 and Q4: December 31) | The opening of the market on the third (3rd) Trading Day following the date of public disclosure of the financial results for that quarter |
The safest period for trading in the Company’s securities, assuming the absence of Material Nonpublic Information, is probably the first ten (10) days of the Trading Window.
From time to time, the Company may also recommend that directors, officers, selected employees and others suspend trading because of developments known to the Company and not yet disclosed to the public. In such event, such persons will be advised not to engage in any transaction involving the purchase or sale of the Company’s securities during such period and should not disclose to others the fact of such suspension of trading.
It should be noted, however, that even during the Trading Window, any person possessing Material Nonpublic Information concerning the Company should not engage in any transactions in the Company’s securities until such information has been known publicly for at least two (2) Trading Days, whether or not the Company has recommended a suspension of trading to that person. Trading in the Company’s securities during the Trading Window should not be considered a “safe harbor,” and all Covered Persons should use good judgment at all times.
Preclearance of Trades. The Company has determined that all officers, directors and certain employees of the Company (Group 1, as defined in the Insider Trading Compliance Program to which this Policy is attached as Exhibit A) are required to comply with the Company’s “preclearance” process (except pursuant to those written programs defined in Section 4 immediately following this section which shall be governed by the provisions thereof). Each director, officer, and relevant employee should contact the Company’s Insider Trading Compliance Officer prior to commencing any trade in the Company’s securities. The Company may find it necessary, from time to time, to require compliance with the preclearance process from certain employees, consultants and contractors other than and in addition to officers and directors.
Trading Programs. Pursuant to SEC Rule 10b5-1 (“Rule 10b5-1”), subject to the requirements set forth in this Section 4, directors, officers and employees of the Company (for purposes of this Section 4, “Program-Eligible Persons”) may establish written programs (each a “Program”) which permit (a) automatic trading of the Company’s stock through a third-party broker (an “Automatic Trading Program”); or (b) trading of the Company’s stock by an independent person (such as an investment bank) who is not aware of Material Nonpublic Information at the time of a trade. Once Programs are implemented in accordance with this Section 4, trades pursuant to such Programs shall not be subject to the preclearance requirements of Section 3 immediately above. Trading pursuant to a Program may occur even at a time outside of the Company’s Trading Window or when the Program-Eligible Person is aware of Material Nonpublic Information. Each Program (or the form of Program established by an investment bank or other third party) must be reviewed by the Company’s legal counsel or the Company’s Board of Directors prior to establishment, solely to confirm compliance with this Policy and the securities laws. These Programs are limited to the following three (3) types:
An Automatic Trading Program established by a Program-Eligible Person at a time when the Program-Eligible Person is not aware of Material Nonpublic Information. The Automatic Trading Program document must specify the number of shares to be purchased or sold, the price at which transaction(s) is/are to take place, and the date(s) on which each transaction is to be performed. Alternatively, the Automatic Trading Program may establish an objective formula for any or all of these criteria. For example, the number of shares could be specified as a percentage of the Program-Eligible Person’s holdings, the price could be set as a limit order and a date could be determined by the stock price reaching a predetermined level.
A Program where transactions in the Company’s stock are initiated by the trustee of a so-called “blind” trust, provided the Program is established by a Program-Eligible Person at a time when the Program-Eligible Person is not aware of Material Nonpublic Information. A “blind” trust is a trust established by a Program-Eligible Person, usually for the benefit of the Program-Eligible Person and any spouse, and sometimes for other family members or others. Investment decisions are made by an independent trustee without any involvement or even knowledge of the Program-Eligible Person. The trustee should be a recognized financial institution possessing trust powers. Under this type of Program, the Program-Eligible Person cannot exert any influence over, or even communicate with, the trustee regarding specific investments. If the trustee becomes aware of Material Nonpublic Information regarding the Company, whether from the Program-Eligible Person or otherwise, the trustee may not engage in a purchase or sale of the Company’s stock.
c. A Program where transactions in the Company’s stock are initiated by an independent agent working on behalf of the Program-Eligible Person, provided the Program is established by a Program Eligible Person at a time when he or she is not aware of Material Nonpublic Information. An “independent” agent may be (i) a registered representative of a broker dealer or someone who otherwise works for an investment firm in a managerial capacity; or (ii) any other person not related to, working for or otherwise indebted to the Program-Eligible Person who, in turn, works with a broker dealer or investment bank to effect transactions in the Company’s stock. Such independent agent must not be aware of any Material Nonpublic Information at the time of any trade. Investment decisions are made by the independent agent without any involvement or knowledge of the Program-Eligible Person.
5. Program Restrictions. All Programs shall be subject to the following restrictions:
a. The Program-Eligible Person cannot engage in any separate transaction (such as a hedging transaction), which directly or indirectly alters or offsets authorized transactions made under the Program.
Any Program-Eligible Person preparing such a Program must allow for the cancellation of a transaction and/or the suspension of a Program upon notice and request by the Company to the extent the Program or any proposed trade (i) fails to comply with applicable law (e.g., exceeding the number of shares which the Program-Eligible Person may sell under Rule 144 in a rolling three-month (3-month) period), or (ii) would create material adverse consequences for the Company (e.g., due to “pooling” accounting restrictions on affiliates or the imposition of lock-up agreements on Company stockholders).
The Program may only be established during a Trading Window.
No Program may be established or modified at a time when the Program-Eligible Person is aware of Material Nonpublic Information. In addition, if a Program-Eligible Person is an officer or director of the Company, such Program-Eligible Person must certify in the Program that, at the time of adoption or modification of the Program, such officer or director is not aware of Material Nonpublic Information, and that such officer or director is adopting the Program in good faith and not as part of a plan or scheme to evade the prohibition of Rule 10b-5.
Once a Program is prepared, it cannot be changed or deviated from (as opposed to the termination thereof, which is covered by the following paragraph) except (i) with notice to the Company’s legal department and (ii) at a time when the Program-Eligible Person is permitted to trade in the Company’s stock under this Policy without a Program (i.e., during the Trading Window, and when the Program-Eligible Person is not aware of Material Nonpublic Information).
Programs may be terminated at any time, but, if terminated, the Program-Eligible Person may not establish a new Program for a period of ninety (90) to one hundred twenty (120) days following the termination of the prior Program as set forth in SEC Rule 10b5-1.
A Program-Eligible Person may not sell more than 50,000 Company shares on any single Trading Day under all Programs established by the Program-Eligible Person pursuant hereto.
A Program-Eligible Person is subject to certain mandatory cooling off periods. For directors and officers, the Program must provide for a cooling off period of the later of: (i) ninety (90) days following the Program’s adoption or modification; or (ii) two (2) business days following the disclosure in certain periodic reports of the Company’s financial results for the fiscal quarter in which the Program was adopted or modified (but not to exceed one hundred twenty (120) days following plan adoption or modification) before any trading can commence under the Program. For all other persons that are not a director, an officer or the issuer, no purchases or sales can occur until the expiration of a thirty-day (30-day) cooling off period from the Program adoption or modification.
A Program-Eligible Person may not use multiple overlapping 10b5-1 plans; and may not rely on the affirmative defense for a single-trade plan to one such plan during any consecutive twelve-month (12-month) period.
A Program-Eligible Person shall cause the Program to provide that all persons entering into a Program must act in good faith with respect to the Program throughout the duration of the Program. The Company may immediately terminate any Program that it determines was put in place either (i) not in good faith; or (ii) as part of a plan or scheme to evade the prohibitions of the securities laws.
In addition, the Company may impose from time to time additional restrictions on Programs proposed to be established by Section 16 Individuals.
The key terms of the Company policy set forth in this Section 4 and Programs established pursuant to it (and trades made pursuant thereto) may be disclosed to the public through a press release, by placement on the Company’s web site or through other means to be determined by the Company in its discretion. The Company shall not have any liability to any Program-Eligible Person as a result of the establishment of a Program, any Company disclosure with respect thereto, or any cancellation of transactions and/or suspension of a Program as discussed above.
6. Tipping. No Insider shall disclose (“Tip”) Material Nonpublic Information to any other person (including family members) where such information may potentially be used by such person to his or her profit by trading in the securities of companies to which such information relates, nor shall such Insider or related person make recommendations or express opinions on the basis of Material Nonpublic Information as to trading in the Company’s securities.
Confidentiality of Nonpublic Information. Nonpublic information, whether material or immaterial, relating to the Company is the property of the Company and the unauthorized disclosure of such information is forbidden. This includes, without limitation, posting any nonpublic information about the Company on Internet chat rooms or bulletin boards.
Potential Criminal and Civil Liability
and/or Disciplinary Action
1. Liability for Insider Trading. Potential penalties for insider trading violations include (a) imprisonment for up to twenty (20) years, (b) criminal fines of up to $5 million and (c) civil fines of up to three (3) times the profit gained or loss avoided. If the Company fails to take appropriate steps to prevent illegal insider trading, the Company may have “controlling person” liability for a trading violation, with civil penalties of up to the greater of $1 million and three (3) times the profit gained or loss avoided, as well as a criminal penalty of up to $25 million. The civil penalties can extend personal liability to Company’s directors, officers and other supervisory personnel if they fail to take appropriate steps to prevent insider trading.
Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly referred to as a “Tippee”) to whom they have disclosed nonpublic information regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in the Company’s securities. The SEC has imposed large penalties even when the disclosing person did not profit from the trading. The SEC, all national and international stock exchanges, as well as the Financial Industry Regulatory Authority (“FINRA”) use sophisticated electronic surveillance techniques to uncover insider trading.
Possible Disciplinable Actions. Employees or consultants of the Company who violate this Policy shall also be subject to disciplinary action by the Company, which may include ineligibility for future participation in the Company’s equity incentive plans and immediate termination of employment.
Individual Responsibility
Every director, officer, employee and consultant has the individual responsibility to comply with this Policy, and to ensure compliance by members of their family and household, against insider trading, regardless of whether the Company has recommended a trading window to that Insider or any other Insiders of the Company. The guidelines set forth in this Policy are guidelines only, and appropriate judgment should be exercised in connection with any trade in the Company’s securities at all times.
Except as may be permitted by establishment of a Program and compliance with Rule 10b5-1 as described above, an Insider may, from time to time, have to forego a proposed transaction in the Company’s securities even if such Insider planned to make the transaction before learning of the Material Nonpublic Information and even though the Insider believes they may suffer an economic loss or forego anticipated profit by waiting. Transactions that may be necessary or justifiable for personal reasons (such as the need to raise money for an emergency expenditure) must be reviewed on a case-by-case basis by the Company’s Insider Trading Compliance Officer. Even the appearance of an improper transaction must be avoided to preserve our reputation in adhering to the highest standards of conduct.
Applicability of Policy to Material Nonpublic Information
Regarding Other Companies
This Policy and the guidelines described herein also apply to Material Nonpublic Information relating to other companies, including, without limitation, the Company’s customers, value-added resellers, original equipment manufacturers, strategic alliances, vendors or suppliers (“Business Partners”), when that information is obtained in the course of employment with, or other services performed on behalf of, the Company. Civil and criminal penalties, and termination of employment, may result from trading on Material Nonpublic Information regarding the Company’s Business Partners. All Covered Persons should treat Material Nonpublic Information about the Company’s Business Partners with the same care required with respect to information related directly to the Company.
Definition of Material Nonpublic Information
It is not possible to define all categories of material information. However, information should be regarded as material if there is a reasonable likelihood that it would be considered important to an investor in making an informed investment decision regarding the purchase, hold or sale of the Company’s securities. Either positive or negative information may be material.
While it may be difficult under this standard to determine whether particular information is material, there are various categories of information that are particularly sensitive and, as a general rule, should always be considered material. Examples of such information include, without limitation:
| · | Financial results |
| · | Projections of future earnings or losses |
| · | Significant developments in actual or threatened litigation |
| · | Major changes in senior management |
| · | The gain or loss of a substantial customer or business partner |
| · | News of a pending or proposed merger |
| · | Acquisitions |
| · | Significant transactions or contracts with Business Partners |
| · | News of the disposition of a subsidiary |
| · | Impending bankruptcy or financial liquidity problems |
| · | New product announcements of a significant nature |
| · | Significant product defects or modifications |
| · | Significant pricing changes |
| · | Stock splits |
| · | New equity or debt offerings |
Nonpublic information is information that has not been previously disclosed to the general public and is otherwise not available to the general public.
Certain Exceptions
For purposes of this Policy, the Company considers that the exercise of stock options for cash under the Company’s stock option plans or the purchase of shares under employee purchase plans that may be adopted in the future (but not the sale of any such shares) is exempt from this Policy, since the other party to the transaction is the Company itself and the price does not vary with the market but is fixed by the terms of the option agreement or the plan.
Post-Termination Transactions
This Policy continues to apply to your transactions in Company securities even after you have terminated your employment or other services to Company as follows: if you are aware of Material Nonpublic Information when your employment or service relationship terminates, you may not trade in Company securities until that information has become public or is no longer material. In all other respects, the procedures set forth in this Policy will cease to apply to your transactions in Company securities upon the expiration of any closed Trading Window period that is applicable to your transactions at the time of your termination of employment or services.
Non-Disclosure
Maintaining the confidentiality of the Company’s information is essential for competitive, security and other business reasons, as well as to comply with securities laws and the confidentiality obligations you have promised to the Company upon commencing your employment or other affiliation with the Company. You should treat all information you learn about the Company or its business plans in connection with your employment and/or services as confidential and proprietary to the Company. Inadvertent disclosure of confidential or inside information may expose the Company and you to significant risk of investigation and litigation. The timing and nature of the Company’s disclosure of material information to outsiders is subject to legal rules, the breach of which could result in substantial liability to you, the Company and its management. Accordingly, it is important that responses to inquiries about the Company by the press, investment analysts or others in the financial community be made on the Company’s behalf only through authorized individuals.
Inquiries
Please direct your questions as to any of the matters discussed in this Policy to the Company’s Insider Trading Compliance Officer.
Additional Information for
Officers and Directors
Directors and officers of the Company must also comply with the reporting obligations and limitations on short-swing transactions set forth in Section 16 of the Exchange Act. The practical effect of these provisions is that officers and directors who purchase and sell the Company’s securities within a six-month (6-month) period must disgorge all profits to the Company whether or not they had knowledge of any Material Nonpublic Information. Under these provisions, and so long as certain other criteria are met, neither the receipt of an option under the Company’s option plans, nor the exercise of that option, is deemed a purchase under Section 16; however, the sale of any such shares is a sale under Section 16. Directors and officers may engage only in direct purchases and sales of the Company’s Common Stock. Moreover, no officer or director may engage in short sales, transactions in put or call options or other derivative securities, or other inherently speculative transactions with respect to the Company’s securities at any time. The Company has provided, or will provide, separate memoranda and other appropriate materials to its directors and officers regarding compliance with Section 16 and its related rules.
EXHIBIT B
TO
INSIDER TRADING COMPLIANCE PROGRAM
KAYA HOLDINGS, INC.
OFFICERS AND DIRECTORS SUBJECT TO SECTION 16
| A. | Board of Directors: |
Craig Frank
Carrie Schwarz
Mitchell Chupak
B. Executive Officers:
|
Name |
Title |
|
Craig Frank
|
Chairman of the Board and Chief Executive Officer
|
EXHIBIT C
TO
INSIDER TRADING COMPLIANCE PROGRAM
KAYA HOLDINGS, INC.
INSIDER TRADING COMPLIANCE PROGRAM PRECLEARANCE CHECKLIST
Individual Proposing to Trade: _______________________________
Compliance Officer: _______________________________
Proposed Trade Date/Volume: _______________________________
Date: _______________________________
| ¨ | Trading Window. Confirm that the trade will be made during the Company’s “trading window.” |
| ¨ | Section 16 Compliance. Confirm, if the individual is an officer or director subject to Section 16, that the proposed trade will not give rise to any potential liability under Section 16 as a result of matched past (or intended future) transactions. With respect to Rule 16b-3 plans, ensure that a stock option has been held for at least six (6) months from the date of grant prior to sale of the shares, and that employee stock purchase plan shares, if applicable, have been held for at least six (6) months from the date the purchase price was determined. |
Also, ensure that a Form 4 has been or will be completed and will be timely filed.
| ¨ | Prohibited Trades. Confirm, if the individual is an officer or director subject to Section 16, that the proposed transaction is not a “short sale,” put, call or other prohibited or strongly discouraged transaction. |
| ¨ | Rule 144 Compliance. Confirm that: |
| ¨ | Current public information requirement has been met; |
| ¨ | Shares are not held by affiliate, the selling stockholder has not been an affiliate during the preceding ninety (90) days, current public information requirement and the six (6) months holding period has been met; |
| ¨ | Shares are not held by affiliate, the selling stockholder has not been an affiliate during the preceding ninety (90) days, and one (1) year holding period has been met (current public information requirement not applicable); |
| ¨ | Shares are held by affiliate and the one (1) year holding period has been met; |
| ¨ | For affiliates, volume limitations are not exceeded (confirm the individual is not part of an aggregated group) or does not apply; |
| ¨ | The manner of sale requirements have been met; and |
| ¨ | The Notice of Form 144 has been completed and filed. |
| ¨ | Rule 10b-5 Concerns. Confirm that (i) the individual has been reminded that trading is prohibited when in possession of any material information regarding the Company that has not been adequately disclosed to the public, and (ii) the Compliance Officer has discussed with the insider any information known to the individual or the Compliance Officer which might be considered material, so that the individual has made an informed judgment as to the presence of Material Nonpublic Information. |
__________________________________________
Signature of Insider Trading Compliance Officer
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Craig Frank, Chairman of the Board, President, Chief Executive Officer and Chief Acting Financial Officer of Kaya Holdings, Inc. (the “ Registrant ”), certify that:
| 1. | I have reviewed this report on Form 10-K for the year ended December 31, 2024 of the Registrant (the “ Report ”); | |
| 2. | Based on my knowledge, the Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the Report; | |
| 3. | Based on my knowledge, the financial statements, and other financial information included in the Report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in the Report; | |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-a15(f) and 15d-15(f) for the Registrant and have: |
| a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the Report is being prepared; | |
| b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
| c) | evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in the Report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the Report based on such evaluation; and | |
| d) | disclosed in the Report any change in the Registrant’s internal controls over financial reporting that occurred during the Registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
| 5. | I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): | |||
| a) | All significant deficiencies and material weaknesses in the design or operation of internal controls which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and | |||
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls. | |||
Dated: April 29, 2025
| KAYA HOLDINGS, INC.. | ||
| By: | /s/ Craig Frank | |
| Craig Frank, Chairman, President Chief Executive Officer, Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer) | ||
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Annual Report of Kaya Holdings, Inc. (the " Company ") on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the " Repor t"), I, Craig Frank, Chairman, President, Chief Executive Officer and Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of our knowledge, that:
| 1. | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | |
| 2. | the information contained in the Report fully presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: April 29, 2025
| KAYA HOLDINGS, INC.. | ||
| By: | /s/ Craig Frank | |
| Craig Frank, Chairman, President, Chief Executive Officer and Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer) | ||