Business Overview



                                     PART I





Item 1. Business.



  Overview



Kaya Holdings is a vertically integrated legal marijuana enterprise that produces, distributes, and/or sells 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.

KAYS is a veteran of the global legal cannabis industry, with more than six years of operational experience. KAYS is the first U.S. publicly traded company to operate a legal marijuana dispensary, as well as the first to vertically integrate by adding cultivation and manufacturing.

The Company's business strategy seeks to achieve four fundamental objectives:





   · maintaining direct access to customers (to own the relationship with end-users);




   · effecting vertical integration to control the supply chain (to control cost,
     selection and quality);




   · introducing strong brands in tradition and innovative categories (to control
     asset development); and




   · creating the capacity to expand nationally and internationally as
     regulations and opportunities permit.





Kaya Holdings currently operates three majority-owned subsidiaries, each responding to various demands and opportunities in the cannabis industry, to aid in the execution of these objectives:

Marijuana Holdings Americas, Inc.

Marijuana Holdings Americas, Inc. ("MJAI"), incorporated in 2014, operates the Company's U.S. based cannabis operations including its Kaya Shack™ retail brand and the Kaya Farms™ cultivation brand.

After an evaluation of several factors including reputation for cannabis excellence, costs of entry, learning opportunity, and ease of regulatory structure, the Company selected Oregon as its point-of-entry into the legal cannabis sector where it commenced operations in Oregon in July 2014. Oregon is universally recognized for its excellence in cannabis cultivation and is part of the famed "Green Triangle" of expert cannabis cultivation that also includes Northern California. Having Oregon as the Company's learning ground has allowed the Company to combine "traditional" methods of cannabis cultivation with modern agriculture techniques.

The Company's US operations are currently focused in Oregon, where all of the Company's operations are licensed by the Oregon Liquor Control Commission (the "OLCC'), which has jurisdiction over legal medical and recreational cannabis grow, production and retail operations. The Company has two active OLCC Marijuana Retailer Licenses, each of which allow for one brick-and-mortar physical dispensary location as well as unlimited delivery operations tied to the geographic location of the fixed based licensed operations. KAYS currently operates two Kaya Shack™ retail outlets (one in South Salem and one in Portland).

The Company has developed its own proprietary Kaya Farms™ strains of cannabis, which it has grown and produced at the various medical and recreational grows that the Company has operated and maintained over the past seven years in Oregon.

The Company owns a 26-acre farm in Lebanon, Linn County, Oregon, on which it is in process of constructing an 85,000-square foot Kaya Farms™ Greenhouse Grow and Production Facility. The Company has received county zoning approvals for the complex, and has been notified by the OLCC that they are ready to proceed with KAYS Production (Grow) Licensing for the Linn County Facility pending completion of initial construction.





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Kaya Brands USA

Kaya Brands USA, Inc. ("KBUS") is being incorporated to manage and leverage the intellectual property associated with the Kaya family of brands and seek out US based projects and ventures to enhance stockholder value associated with their development.

KBUS presently manages 18 proprietary brands formulated and developed by the Company which includes the Kaya Shack™ retail brand, the Kaya Farms™ cultivation brand, and the Kaya Gear™ apparel brand, as well as a host of carefully developed cannabis and CBD products that include cannabis extracts and concentrates, vape cartridges, chocolates, gummies and chews, topicals and creams, beverages, foods, and cannaceuticals.

Kaya Brands International and International Plans for Expansion

Kaya has implemented a strategic shift away from the U.S. cannabis market, its initial intended focus, placing current expansion emphasis on international opportunities and brand extensions. While the US Cannabis markets initially received a strong tail wind from the 2021 change in administration and the fact that US Cannabis Banking and Taxation Laws and Regulations are forecast to become more industry friendly, KAYS believes that it will still be some years until such time that the Federal Laws allow for Interstate Cannabis Commerce and true economies of scale to develop within the emerging U.S. Cannabis Markets. Thus, KAYS has developed an exciting international growth program with the potential for strategic position and growth, all the while remaining prepared for the eventuality of a more inviting U.S. market.

Kaya Brands International, Inc. ("KBI") was incorporated in late 2019 to serve as the Company's vehicle for expansion into worldwide cannabis markets. KBI is seeking to leverage the other product brands for development of the Kaya Shack™ retail and Kaya Farms™ brands in Europe and elsewhere as opportunities permit. Projects currently under development include licensing of the Kaya Farms™ brand to develop cultivation projects in Greece, Israel and other potential locations.

This segregation of US and foreign based activities would allow for KAYS to eventually have KBI listed on a recognized securities exchange such as the OTCQX, NASDAQ or NYSE in the US, the Canadian Securities Exchange or "CSE" in Canada (a Canadian Exchange that has proven to be an excellent source of new institutional and retail investment capital and liquidity for both Canadian and U.S.-based OTC cannabis stocks) or other such international exchange that would allow KBI to access additional capital not currently available through US over-the counter ("OTC") markets.

KAYS intends to maintain a majority ownership of KBI, but is also working on plans to issue a dividend of common stock in KBI to stockholders of record at a date to be determined by the Board of Directors of KAYS.

Additionally, KAYS intends to structure KBI's participation in projects that would lead to these projects eventually seeking their own public company status and corresponding issuance of securities which could potentially significantly enhance the value of KAYS/KBI's investment and possibly lead to dividends for KAYS/KBI's stockholders. There can be no assurance given as to whether or when KAYS will be able to do so, or it would ultimately be successful in increasing stockholder value.







Kaya Farms Greece



On January 11, 2021, KAYS/KBI, through a majority owned subsidiary of KBI (Kaya Farms Greece or "KFG") and Greekkannabis ("GKC", an Athens based Cannabis Company that is licensed to build ) 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.

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.

The Epidaurus Project is smaller in scale than the Company's 15-acre project in Thebes, Greece, allowing KAYS to fast-track cultivation and processing of its proprietary branded cannabis products for distribution in legal EU markets while awaiting greater legal cannabis demand to emerge prior to developing a large-scale capacity in Thebes.

The Thebes Project has a development license from the Greek authorities and a purchase option on 15 acres in Thebes, Greece. The farm has large-scale cultivation capacities and the company expects to develop the site once legal cannabis demand warrants an increase in capacity.





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Kaya Farms Israel




On March 30, 2021 the Company confirmed that its Israeli subsidiary, Kaya Shalvah has been awarded its initial permit from the "YAKAR", the Department for Medical Cannabis in the Israeli Ministry of Health, to develop an Israeli cannabis cultivation and processing facility. This initial permit grants Kaya Shalvah permission to proceed with its plans to develop commercial scale cannabis cultivation and processing in Israel.

We have chosen to become active in the Israeli cannabis market because of this position as global center of cannabis science, where technologies are specifically developed to enhance cannabis cultivation processes and yields, and innovative consumer products are emerging that have potential interest for both the medical and recreational markets throughout the world.

Kaya Shalvah is currently focused on two separate paths of development to launch its Israel Operations- the first being through participation in the government sponsored Greenegev Cannabis Ecosystem in Yerucham, Israel and the second path being through potentially acquiring an interest in currently licensed medical cannabis production and processing facilities that are already operating in Israel.





Corporate Information



We are incorporated in the State of Delaware. Our corporate office is located at 915 Middle River Drive, Suite 316, Fort Lauderdale, Florida, 33304. Our telephone number is 954-892-6911 and our corporate website is www.kayaholdings.com. Information contained on our corporate website does not constitute part of this Annual Report.







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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 New Frontier Data, more than 260 million adults globally consumed cannabis at least once annually in 2018 - placing global spending on cannabis (legal & illicit) at $344 billion USD annually.

The Insight Partners, another research group, in their 2019 Global Cannabis Market report projects the global cannabis market to reach $153,689,900,000 in 2027, which represents a CAGR of 34% from 2019-2027.

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.

North America

North America, according to New Frontier Data, represents a total cannabis demand (legal & illicit) valued at $86 billion USD.

The United States and Canada have been leading the global legal cannabis movement, which in turn impacts the way governments worldwide are structuring the regulation of legal cannabis in their own countries.

Canada

Canada legalized medical cannabis in 2001 and in October 2017 the Federal Cannabis Act came into effect, making Canada the first G7 nation to legalize recreational cannabis. The legal structure has given rise to large Canadian cannabis companies that have achieved high valuations, which they have leveraged to purchase supply chain companies and invest in overseas infrastructure projects to produce cannabis at costs lower than those in Canada. Increasing competition from U.S. and European countries and investor frustration has seen some decline of valuation and some Canadian companies have been forced to shrink operations and lessen their developing global footprint.

Canadian cannabis companies currently export to more than twenty countries. Up until 2020, most exports of cannabis from Canada had been sent to European Countries. Exports of oil and flowers from Canada to Europe increased from 2019-2020 by 28% in terms of weight, but have declined, with most flowers being exported to Israel and the majority of oil being exported to Australia.

The United States

The United States has been the global leader in cannabis innovation; including new genetics, cultivation techniques, derivative products, and delivery methods.

Cannabis remains federally illegal in the United States, with the interstate transport and sale of cannabis prohibited. Nonetheless, support for legal recreational cannabis remains above 60% in most reputable polls, and 48 U.S. states have some form of legal medical or recreational cannabis (including hemp/CBD). Only Idaho and Nebraska prohibit all forms of cannabinoids.

States with some type of legal medical cannabis includes Alabama, Arkansas, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, New Hampshire, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, New Hampshire, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, West Virginia, Wisconsin, and Wyoming.

States permitted the sales of recreational, or "adult-use" cannabis are Alaska, Arizona, California, Colorado, Connecticut, Illinois, Maine, Massachusetts, Michigan, Montana, Nevada, New Jersey, New York, New Mexico, Oregon, South Dakota, Vermont, Virginia and Washington. The District of Colombia (Washington D.C.) also permits adult-use cannabis.

Despite the number of individual states permitting the cultivation and distribution of cannabis (including hemp), in 2021 the U.S. Senate failed to pass a bill that would reclassify cannabis from a Schedule I drug under the Controlled Substances Act, which would have allowed cannabis companies access to banking and relief from punitive IRS rules.

Europe

Some key points about the European medical cannabis market are:





    §   New Frontier Data estimates the European cannabis market (legal & illicit)
        generates $69 billion USD annually.




    §   Prohibition Partners Europe forecasts Europe to be the largest legal
        cannabis market worldwide by 2024, with a total value of $39.1 billion.




    §   The Insight Partners estimates the European cannabis market will be worth
        $474 million by the end of 2021. They estimate the market to grow with a
        CAGR of 67.4% from 2021 to reach $3.75 billion by 2025.




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    §   Europe is projected to surpass North America (currently the largest
        medical cannabis market) in 2024, with a market value of $39.1 billion to
        North America's $37.9 billion.




    §   In Europe Germany continues to be largest and fastest growing medical
        cannabis market. Sales of insurance covered cannabis grew to 67% in 2019.




    §   Total European market sales, including isolated cannabinoids, finished
        pharmaceutical products, cannabis flower and full spectrum cannabis
        products exceeded $295 million in 2019.




    §   Germany has by far the largest number of medical cannabis patients as of
        2021. By 2025, it is expected that countries like France and the United
        Kingdom will have developed their patient access considerably, growing to
        represent a significant share of the European market.




Israel and Greece

In June 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.

Israel is currently the largest importer of medical cannabis in the world. By June 2020 Israel had imported more than six tonnes of cannabis. The strong medical cannabis program stems from traditionally progressive cannabis policies and strong cultural acceptance of cannabis medicinal uses.

The Israeli cannabis sector has been slowed by regulations, which have hindered Israeli cannabis exports and complicated domestic distribution. There is currently no mutual recognition agreement between local Medical Cannabis GMP and EU-GMP, denying many Israeli firms the qualifications necessary to export to Europe.

In February 2021, Israeli cannabis company Panaxia was chosen to supply medical cannabis to Cyprus and France as part of new government programs. IM Cannabis exports cannabis to Germany by purchasing EU-GMP flower and selling the product to German wholesalers.



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The Kaya™ Family of Brands



KAYS produces, distributes, and/or sells 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.

Currently Operational Brands (2014-2021)













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Next Stage Traditional (2022-2023)











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Next Stage Innovative (2022-2023)





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Note: The "Next Stage Traditional" and "Next Stage Innovative" brands are all targeted for release in 2022. The Company is currently awaiting the culmination of both the buildout of the Kaya Farms Ag Facility in Lebanon, Oregon and developments with the Company's projects in Israel and Greece to finalize the release dates for these brands. In the event that the licensing approval and construction timeline of these facilities is delayed or experiences difficulties, the Company has sourced other alternatives to expedite the release of the brands and will update stockholders accordingly.





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The Kaya Shack™ Brand




Kaya Holdings operates the Kaya Shack™ brand of legal medical and recreational retail marijuana retail stores. Kaya Holdings operates two recreational marijuana retail outlets and medical marijuana dispensaries in Oregon under the Kaya Shack™ brand.

Dubbed by the mainstream press as the "Starbucks of Marijuana" after our first outlet opened in July 2014, our operating concept is simple: to deliver a consistent customer experience (quality products, fair prices and superior customer service) to a broad and diverse base of customers. Kaya Shack™ meets the quality needs of the "marijuana enthusiast", the comfort and atmosphere of all including "soccer moms" and the price sensitivities of casual smokers.

The Kaya Shack™ brand communicates positive thinking and joy, with signs adorning the walls that read "It's a Good Day to have a Good Day," "Some of our Happiest Days Haven't Even Happened Yet," and our signature "Be Kind."

Kaya Shack™ retail outlets are open 7 days a week- Monday through Saturday from 8:00 am to 10:00 pm, and Sunday 8:00 AM to 9:00 PM. Operations follow an operational manual that details procedures for 18 areas of operation including safety, compliance, store opening, store closing, merchandising, handling of cash, inventory control, product intake, store appearance and employee conduct.

In compliance with regulations, all marijuana and marijuana infused products sold through our stores are quality tested by independent labs to assure adherence to strict quality and OLCC regulations.

The Company is exploring opportunities to expand its operations beyond Oregon by replicating its Kaya Shack™ brand retail outlets through franchising in other states where medial and or recreational cannabis use is legal or expected to become legal in the near term, as well as in Canada, Greece and Israel, as part of KAYS International Expansion Plans. KAYS also is targeting opening corporate owned marijuana production and processing facilities to support the envisioned franchised outlets, and to both maintain quality control and offer customers a consistent customer experience while reducing costs of goods to franchisees.







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Kaya Shack™ Retail Outlets



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All stores feature a check-out stand wrapped to feature the Company's proprietary brand of pre-rolls, Kaya Buddies. The Buddies program is an exciting and popular pre-roll offering, featuring a wide selection (20-30 strains of pre-rolls) and featuring our special Kaya Saying in each Buddies tube. A glass display case showcases at least 25 strains of marijuana flower, which the stores serve to customers "deli style", weighing straight from the jar to the customer's take-out tube. An additional display case with a varied selection of oils, concentrates and topicals rounds out the cannabis product display.







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The stores also feature standing display cases with cannabis intended glassware under the Company's brand Really Happy Glass, as well as a rack of proprietary t-shirt designs marketed under the Company brand Kaya Gear. The store also has a hospitality area that offers free water, coffee, tea and hot cocoa. As required by law, all products containing marijuana are either behind locked glass or behind the counter and out of customer reach.





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I. Kaya Shack™ , 1719 SE Hawthorne Blvd., Portland, Oregon.









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Our first Kaya Shack™ OLCC licensed marijuana store (located in the heart of the trendy Hawthorne district in southeast Portland, the "Greenwich Village" of the West Coast) opened for business July 03, 2014. The store is located next door to a cell phone repair shop, and near to Devil's Dill restaurant and No Fun pub. There are also a McMenamins restaurant, tattoo parlor, convenience store, hair/nail salon and a soccer sports bar. The area around the shop is mixed use (commercial and residential) and has a footprint of approximately 700 square feet and is the model for the Company's small urban shops.





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II. Kaya Shack ™ Marijuana Superstore, South Salem, Oregon.







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Our second Kaya Shack™ OLCC licensed marijuana store (located in South Salem, Oregon) opened for business on October 17, 2015. The store is located in a strip mall alongside a Caesar's Pizza, Aaron's furniture, a convenience store, a tanning salon, and a nail salon. The plaza also has a Subway, a sports bar and a laundromat. The area around the shop is primarily commercial with residential complexes under construction and has a footprint of approximately 2,100 square feet and serves as the model for the Company's superstores featuring larger display areas and a soon-to-be-opened Pakalolo Juice Company infused fresh fruit smoothies stand.





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Kaya Shack™ Car Fleet and Home Delivery





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The Company is licensed by the OLCC for home delivery for both of its retail licenses and has 2 Kaya Cars featuring the Company's branding logos outfitted with safes and security equipment. We have begun to offer deliver within the geographic areas of Portland and Salem. The Company has developed the website www.kayadelivers.com to advance the growth of its delivery service and to offer pre-ordering for curbside pickup in light of the coronavirus pandemic to better serve our customers.



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Kaya Farms™

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The Company has developed its own proprietary Kaya Farms™ strains of cannabis, which it has grown and produced at the various medical and recreational grows that the Company has operated and maintained over the past seven years in Oregon. Additionally, KAYS has produced a full line of cannabis concentrates and extracts which it has initially produced through third party manufacturers and marketed at the Kaya Shack Stores, along with the very popular Kaya Buddies line of strain specific cannabis cigarettes.

Please see the following pages for an overview of our current operations in Oregon.



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Kaya Farms™





Lebanon, Linn County, Oregon Marijuana Grow and Manufacturing Complex







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In early 2015, KAYS commenced its own medical marijuana grow operations for the cultivation and harvesting of legal marijuana thereby becoming the first publicly traded U.S. company to own a majority interest in a vertically integrated legal marijuana enterprise in the United States. Since that time KAYS has operated various grow facilities to feed the Kaya Shack Supply Chain, and in August 2017, KAYS acquired its first property for a large scale facility- a 26-acre parcel in Lebanon, Linn County, Oregon, where we intend to develop an 85,000-square foot Kaya Farms™ facility.



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We filed for zoning and land use approval in early 2018, and after numerous regulatory challenges and delays, we finally received zoning and land use approval in early 2019 to build on the property. We have been notified by the OLCC that they are ready to proceed with KAYS Production (Grow) Licensing for the Linn County Facility pending completion of final construction.

Management believes that the development of the property will position the Company for future growth and expansion, including increased Marijuana Canopy production to the maximum extent allowed by law through use of both greenhouse and outdoor grows.

Under present laws the property can easily deliver 6-8,000 pounds of cannabis each year; if future regulations permit this capacity could easily be increased to over 100,000 pounds of cannabis per year.

When Federal Prohibition of marijuana ends and national and international cannabis trade can begin, we believe that Oregon is uniquely positioned to become America's "pot basket" due to its superior climate and state history involving generations of Oregonian Cannabis Growers; ideal weather + extensive generational knowledge = superior, lower cost cannabis products for export.





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Kaya Buddie™ Strain Specific Cannabis Cigarettes







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In 2016 the Company introduced a signature line of strain-specific connoisseur-grade, pre-rolled cannabis cigarettes branded as "Kaya Buddies™". Kaya Buddies™ cannabis cigarettes have been very well received by medical patients and recreational users, with the Company selling over 100,000 Kaya Buddies™ since launching the brand in January 2016. The brand, marketed under the tagline "Buds with Benefits", features over 50 different strains of connoisseur-grade, high quality cannabis and proprietary specialty blends. Many cannabis retailers produce prerolls, but none that we know of offer strain specific prerolls made from the buds of the flower.







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Kaya Brands International





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After over five years of conducting "touch the plant" U.S. cannabis operations inside the strict regulatory confines of a public company, KAYS has formed Kaya Brands International, Inc. ("Kaya International" or "KBI"), to leverage its experience and expand into worldwide cannabis markets. KBI's current operations and initiatives include Canada Greece, and Israel, with additional areas under consideration for Mexico, Uruguay and Zimbabwe.

Canada





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Canadian Franchising: KAYS has endeavored to launch its franchise program and growth strategy in Canada. To this end, the Company has retained the Toronto based law firm of Garfinkle Biderman LLP to prepare the legal infrastructure required to enable the Company to sell Kaya Shack™ franchises in Canada.

Garfinkle Biderman has since completed the necessary legal work and the Company is currently in negotiations with different potential development partners to launch franchised operations in Canada and hopes to establish up to 100 franchised locations there over the next five years.







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Greece
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Kaya Kannabis is a joint venture project cultivation-for-export cannabis-farming and processing project of Athens based Greekkannabis PC ("GKC") and KBI. GKC is an Athens, Greece based cannabis company with deep ties in the Greek business community and a strong presence in the academic and agricultural communities. The alliance is designed to combine the business acumen and extensive European network of GKC with the broad cannabis industry and cannabis cultivation experience of Kaya Holdings.

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, KAYS/KBI, 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.

Kaya Kannabis- Epidaurus, Greece Project





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                             Site of Epidaurus Land




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.







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Interior View- KAYS' newest project with 50K square feet of already constructed


                            buildings is designed to

   fast-track sales of KAYS proprietary branded cannabis products to the EU.


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.

The Epidaurus project is smaller in scale than the Company's 15-acre project in Thebes, Greece, allowing KAYS to fast-track cultivation and processing of its proprietary branded cannabis products for distribution in legal EU markets while awaiting greater legal cannabis demand to emerge prior to developing a large-scale capacity in Thebes.

Kaya Kannabis- Thebes, Greece Project







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Kaya Kannabis Medical Cannabis Production Facility in Thebes, Greece (Project


                               Design Rendering)



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The Thebes Project, as currently envisaged by management consists of up to 20,000 sq. meters of light deprivation greenhouses and 60,000 square feet of structure to be used for storage, laboratory, processing, manufacturing, logistics, and support/administrative space. The Thebes Project has already obtained the initial cannabis construction license approvals from Greek government authorities and is awaiting project financing.





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Situated on 15 acres of land which GKC has contracted to purchase, the Thebes Project is much larger than the Epidaurus Project and allows the Company "Room to Grow" should the legal circumstances in a country or region suddenly permit (i.e., German legalization of recreational cannabis and the subsequent rapid rise in demand). Thebes, with large scale production and processing capabilities provides KAYS the operational flexibility needed to secure and maintain market position in a rapidly evolving market arena once legal cannabis demand warrants an increase in capacity.







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Israel

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     Kaya Shalvah Cannabis Production Facility (Project Design Rendering).


Israel has been a pioneer in cannabis R&D for several decades, and is often referred to as the "Silicon Valley" of the Global Medical Cannabis Industry. Israel currently has the world's largest medical marijuana program and is the largest importer of cannabis.

There is legislation under Knesset review to permit adult-use cannabis, making the domestic Israeli market an attractive opportunity. Upon legalization of adult use cannabis in Israel, KAYS expects to sell flower and oils, and as permitted, the KAYS portfolio of brands in Israel, leveraging its adult use market experience and Kaya Shack™ retail shops (through a local franchisee) to serve the domestic Israeli market, and has begun to target distribution agreements with the Israeli Pharmaceutical Industry.

We have chosen to become active in the Israeli cannabis market because of this position as global center of cannabis science, where technologies are specifically developed to enhance cannabis cultivation processes and yields, and innovative consumer products are emerging that have potential interest for both the medical and recreational markets throughout the world.

On March 30, 2021 the Company confirmed that its Israeli subsidiary, Kaya Shalvah has been awarded its initial permit from the "YAKAR", the Department for Medical Cannabis in the Israeli Ministry of Health, to develop an Israeli cannabis cultivation and processing facility. This initial permit grants Kaya Shalvah permission to proceed with its plans to develop commercial scale cannabis cultivation and processing in Israel.

Kaya Shalvah is currently focused on two separate paths of development to launch its Israel Operations- the first being through participation in the government sponsored Greenegev Cannabis Ecosystem in Yerucham, Israel and the second path being through potentially acquiring an interest in currently licensed medical cannabis production and processing facilities that are already operating in Israel.

Greenegev Cannabis Ecosystem, Yerucham, Israel

Under the leadership of its Mayor, Tal Ohana, Yerucham has embarked on a program to transform the small desert town into "Greenegev", the first cannabinoid ecosystem in Israel. The plans call for cultivation, processing and research companies to concentrate their respective activities in Yerucham, attracting services that provide each resident company with core advantages by virtue of the cooperation and support the ecosystem community is uniquely positioned to provide. Yerucham has a Development Zone A designation from the Israeli government, making economic growth in the area a national priority and attaching a wide range of financial incentives to companies therein establishing operations.

Kaya Shalvah meets all the prescribed criteria and the licensing process is progressing, with the full support and valuable assistance of the Yerucham mayor's office and the municipal staff. Kaya Shalvah is also benefitting from the support and guidance of Major General (Res.) Amram Mitzna, a former Yerucham mayor and the current chairman of the Yerucham Fund.





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Kaya Shalvah is currently awaiting for the Israeli Government to proceed with the land tender program (which has been delayed due to COVID 19 issues). Upon commencement with the bidding program, Kaya Shalvah will submit its land acquisition bid for 100 Dunams (approximately 25 acres) of land to the Israel Land Authority, which is tasked with processing the applications for the land bids that are part of the highly sought after Greenegez Canabis Center in Yerucham, Israel.

Pending receipt of a successful bid through this program, once Kaya Shalvah develops the site in accordance with all Israeli regulations, and meets all requisite standards, the final cultivation and processing licenses will be issued.

The Companyhas established a Board of Directors for Kaya Shalvah that includes:

Offer Lapidot (Brig. Gen. Res.)

A career fighter pilot in the Israel Air Force (1969-1996), Offer served two tours as a fighter squadron commander, and served as commander of the Flight Training School, commander of the Ramon Air Force base, and Head of Planning & Organization (at Air Force HQ). Offer holds the rank of Brigadier General. After his military service Offer spent a number of years in senior management positions at Israel's leading retailer, as well as CEO of a high-tech start-up, only to miss flying and return to the skies as a pilot for El Al airlines. After his mandatory retirement from commercial flying, he joined the El Al executive team as the Director of Safety and Quality for El Al Airlines. Offer studied for his B.A. degree in Economics at Bar Ilan University, and holds an M.S. in Management from the Naval Post Graduate School in Monterey, California.

Ilan Horesh (Col. Res.)


Ilan was a career Israel Defense Forces officer, retiring in 1993 after 23 years at the rank of Colonel. During his career Ilan held numerous command positions with combat ground forces. His final assignment in the IDF was Commander of the School of Electronics and Computerization. After his military service Ilan embarked on a career as an executive and leader in the Israeli high tech sector, working with such companies as Pelephone, Bezek, Paz Oil and others. Ilan has served on the Boards of a number of Israeli companies, including Taldor Computer Systems, Ltd., Rakah Pharmaceutical Industry, Ltd., Ampa Investments, Ltd., and Retalix, Ltd.

Joseph Gayer, Adv.



Joseph "Yossi" Gayer is one of the founders of the international law firm ZAG-S&W. Yossi is a prominent expert in a number of legal fields, including commercial litigation and contracts law, representing clients both on domestic and international matters.

Yossi also represents Israel's leading professional athletes in all fields of sports, including advising sports clubs, organizations, and sponsors in Israel and abroad. His litigation practice has yielded many legal precedents that have influenced the status of professional athletes, both in Israel and abroad, with respect to their rights vis-a-vis employers, sports authorities, and various statutory institutes. Yossi's expertise includes insurance and property law.

Yossi lectures at the Radzyner School of Law at the Interdisciplinary Center (IDC) Herzliya.



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Gadi Katz

Gadi is the founder of Total Immersion Swimming Israel "TISI", the Israel franchise of a multinational corporation in the sports and leisure market. Gadi has built TISI to a current 70 branches operating across Israel, serving thousands of clients annually. Since founding TISI in 2006, Gadi has become expert in online marketing and has development in-house a state of the art marketing and sales Business Intelligence system. Gadi is also an expert in business development, specializing in small and mid-sized companies. Prior to TISI, Gadi was the co-founder and CFO of the American-Israeli Crisis and Issue Management (AICIM) consulting firm. AICIM specialized in high-level advisory services to politicians (including candidates for Head of State) and business leaders globally. Early in his career Gadi practiced law at what is today Israel's largest Law Office Meitar & Co., where he engaged in various business focused matters such as Venture Capital, IPOs, M&As, Joint Ventures, Spin Offs and Corporate Restructurings. Gadi holds a B.A. in Business Administration, Magna Cum Laude, LL.B and an MBA.

Kaya Shalvah's supportive Board of Advisors includes:





Uzi Teshuva


Uzi is a second-generation Israeli farmer, active in agriculture since his teenage years. Since 1991 Uzi has served as the CEO of a farm distributes its agricultural products, grown using groundbreaking and innovative agricultural methods. Uzi became the active Chairman of TAP, an agricultural engineering and technology company specializing in the design, construction and management of agricultural farms in numerous countries worldwide.

Elon Kaplan, Ph.D.


Elon, a Ph.D. in Organizational Psychology is the Founder and CEO of Cytegic, a cutting-edge cyber-risk quantification solution predicated on the idea that enterprise risk is a combination of three key elements: technology, people, and business. Cytegic was recently sold to MasterCard. Elon brings to Kaya Shalvah the guidance of a serial entrepreneur, a scientist and a cyber-security expert. As a business leader, he excels at building exceptional teams and driving innovative breakthroughs. As an applied behavioral scientist, he is trained in specific modeling and statistical methodologies. Prior to Cytegic, Elon was Founder and CEO of Gilon Yaad, Ltd., an organizational business strategy consultancy, where he worked with many large companies, including PayPal, El-Al, Johnson & Johnson, Bank Leumi, Bank HaPoalim, Discount Bank, Maccabi Healthcare, and Comverse.

Rafi Cohen

Rafi is the Israeli Chief of Operations for Day Three Labs. Rafi has managed and overseen small and large-scale cannabis research & development projects since 2015, specializing in medicinal, cosmetic , wellness and animal health product development. For the past five years, Rafi has been dedicated exclusively to working within the emerging Israeli and global cannabis industry, recognizing the commercial and medicinal potential of cannabis. Rafi has distinctive experience in cannabis research projects, product development, clinical studies, investments, and joint ventures. Rafi began his career as a corporate attorney with Fischer Behar Chen Well Orion & Co., where he focused on M&A and strategic corporate development. Later he was a founding partner at Cohen, Light, Ziv and Associates. Rafi has a B.ed. from Herzog College of Education, an MA from Yeshiva University in New York City and an LL.B. from the Hebrew University in Jerusalem.

Josh Rubin

Josh is the founder and CEO of Day Three Labs (DTL). Headquartered in Denver, Colorado and with research operations in Israel, DTL seeks to disrupt the cannabis industry by introducing Israeli cannabis related innovations to the North American and global markets. Josh began his career in the cannabis industry in 2017 as a consultant analyzing trends in the cannabis market. Recognizing the opportunity to bridge the North American and Israeli cannabis sectors, he launched DTL. Josh was well suited to establish DTL, for in addition to his extensive network in Israel, he speaks Hebrew and has experience living and working in Israel. During a five year period in Israel Josh studied at the Hebrew University and the Interdisciplinary College in Herzliya (IDC), worked in the Knesset, and worked for the International Institute for Counter-Terrorism as a researcher. Josh even found time to volunteer as a medic for Magan David Adom. Josh has a Masters of Business Administration from Johns Hopkins University (Marketing), a Masters Degree from IDC in Government and a Bachelor of Arts Degree from Queens College (Psychology & Philosophy).





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.





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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, Israel 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, MMDs 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 a total of 12-15 part-time store employees including budtenders, trimmers, growers, and 4 full-time employees, consisting of the Senior Vice President of Cannabis Operations, the Vice President of Marketing and Brand development, and 2 store managers. Additionally, we engage several consultants to assist with daily duties and business plan implementation and execution. Additional employees will be hired and other consultants engaged in the future as our business expands.

Potential Effects of the COVID-19 Pandemic on our Business

The adverse public health developments and economic effects of the COVID-19 pandemic in the United States and overseas could adversely affect the Company's customers and suppliers as a result of quarantines, facility closures and logistics restrictions in connection with the outbreak. More broadly, the COVID-19 pandemic could potentially lead to an extended economic downturn, which would likely decrease spending, adversely affect demand for our products and services, slow our international expansion plans, harm our business, results of operations and financial condition. The Company cannot accurately predict the effect the COVID-19 pandemic will have on the Company.





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Results of Operations




Three months ended March 31, 2022 compared to three months ended March 31, 2021





Revenues


We had revenues of $188,664 for the three months ended March 31, 2022, as compared to revenues of $237,018 for the three months ended March 31, 2021.





Cost of Goods Sold


Our cost of goods sold for the three months ended March 31, 2022 was $63,900 compared to cost of goods sold of $75,814 for the three months ended March 31, 2021.





Salaries and Wages



Salaries and Wages increased to $99,278 for the three months ended March 31, 2022 as compared to $86,983 for the three months ended March 31, 2021. The increase in salaries and wages was due to normal increase in labor cost.

Selling, General and Administrative Expenses

Selling, general and administrative decreased to $153,674 for the three months ended March 31, 2022 as compared to $195,650 for the three months ended March 31, 2021.





Professional Fees



Professional fees were $200,756 for the three months ended March 31, 2022, as compared to $207,714 for the three months ended March 31, 2021.

Gain or Loss on Impairment of Assets

Gain on impairment of assets was $0 for the three months ended March 31, 2022, as compared to $ 31,671 for the three months ended March 31, 2021.





Interest Expense


Interest expense and debt amortization expense increased slightly to $152,869 for the three months ended March 31, 2022 from $149,859 for the three months ended March 31, 2021.

Amortization of Debt Discount

Amortization of debt discount was $67,082 for the three months ended March 31, 2022, as compared to $142,977 for the three months ended March 31, 2021.

Derivative Liabilities Expense

Derivative liabilities expense decreased to $0 for the three months ended March 31, 2022 from $380,063 for the three months ended March 31, 2021.

Change in Fair Value of Embedded Derivative Liabilities

Change in fair value of embedded derivative liabilities was an expense of $549,005 for the three months ended March 31, 2022 compared to an expense of $4,535,437 for the three months ended March 31, 2021. These changes were due to change in stock price as well as the volatility factors used in the derivative calculations.







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Other Income/(Loss)



Other income was a loss of $768,956 for the three months ended March 31, 2022 as compared to a loss of $5,208,336 for the three months ended March 31, 2021. The increased loss was due largely to a change in derivative liability expenses resulting from a change in stock price as well as the volatility factors used in the derivative calculations.





Net Income (Loss)


We incurred net loss of $1,097,900 for the three months ended March 31, 2022, as compared to a net loss of $5,505,808 for the three months ended March 31, 2021. The majority of our loss during the three-month period ending March 31, 2022 was a result of the derivative liabilities associated with our Convertible Debt and a reduction in our stock price as well as the less volatility factors used in the derivative calculations. The non-controlling interest for the three months ended March 31, 2022 and 2021 was a loss of $24,124 and a gain of $14,400, respectively.

Liquidity and Capital Resources

During the first quarter of 2022 our cash position decreased by $361,632 to $202,639 and our negative working capital deficit was $8,510,357.

As of March 31, 2022, our working capital consisted of cash of $202,639, inventories of $41,777 and prepaid expenses of $13,967 as compared to cash of $70,786, inventories of $61,980 and prepaid expenses of $13,674, as of March 31, 2021.

Our current liabilities include accounts payable and accrued expenses of $921,137, accounts payable and accrued expenses-related parties of $120,188 accrued interest of $1,300,105, current portion of lease liability of $81,323, tax liability of $782,107, convertible notes payable- net of discount of $25,000, notes payable of $9,312 and derivative liabilities of $5,529,568, as compared to accounts payable and accrued expenses of $1,025,797 accounts payable and accrued expenses-related parties of $911,412 accrued interest of $741,710, current portion of lease liability of $130,243, convertible notes payable- net of discount of $175,000, notes payable of $9,312 and derivative liabilities of $22,454,404, as of March 31, 2021.





Financing Transactions


No financing transactions were entered into during the period.





Use of Proceeds




The proceeds from financing transactions that the Company may enter into will be used to fund our growth plan, including the development, operation and expansion of our Kaya Shack™ and Kaya Farms™ operations in Oregon, the development of our new Kaya Shack™ branded cannabis products, and the groundwork required to initiate our planned expansion through Kaya Brands International initiatives in Greece and Israel.







Plan of Operations



Management believes that further proceeds expected to be received from financing transactions that it is seeking to enter into, combined with existing and anticipated revenues, will alleviate the Company's financial difficulties to a significant extent and will allow the Company to meet its anticipated working capital needs for a period of between twelve and eighteen months from the date of this report. However, there can be no assurance that further funding from the contemplated financings will be achieved, or if achieved that they will be successful to the level required to meet the Company's cash needs, or that management's belief will be correct and that the Company will not sooner require additional financing to meet its working capital needs prior to achieving profitability or positive cash flow. Moreover, 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.





Note Conversions


No notes were converted during the period.

Employee Stock Plan Issuances and Director and Officer Restricted Stock issuances

No Employee Stock Plan Issuances or Director and Officer Restricted Stock Issuances were issued during the period.

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