Business Overview
PART I
Item 1. Business.
Overview
Kaya Holdings, Inc., "KAYS" or the "Company" a Delaware corporation, 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 fundamentals 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 three 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), and is in the process of targeting its third license to operate a
Kaya Farm Store and Delivery Hub to service the Southern Oregon Market.
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.
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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 recently 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.
Kaya Brands USA
Kaya Brands USA, Inc. ("KBUS") was recently 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 shareholder 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 recently 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
are receiving a strong tail wind from the recent 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 Shack™ retail
brand for franchising in Canada and 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 shares in KBI to shareholders 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 shareholders. 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
shareholder value.
Corporate Information
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 Memorandum.
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The Global Cannabis Industry
New Frontier Data estimates the existing global demand for cannabis to be $344.4
billion USD, using consumption levels and market prices to reach their estimate.
The illicit market, with the exception of the relatively few countries that
regulate and license cultivation or importation of cannabis, meets the vast
majority of global demand for cannabis.
There are an estimated 263 million people globally who can be classified as
cannabis consumers, demonstrating significant demand for the medical, wellness,
and recreational uses of cannabis. The strength of demand varies by region and
depends heavily on the status of legalization, levels of social acceptance, and
access to cannabis. There are an estimated 1.2 billion people worldwide
suffering from medical conditions for which cannabis has shown therapeutic
value.
There are currently 55 countries with legalized cannabis for medical use. The
regulatory framework varies by country and may differ in rules for qualifying
conditions, physician participation, production and processing, accepted
delivery systems, insurance payment participation, and potency permitted. The
stringency of the rules typically has a significant impact on the size, growth,
and reach of each program.
Canada and Uruguay are the first two nations with legal recreational cannabis,
with a few other nations set to follow, including South Africa, Georgia and
Mexico. The aim of the legal programs is to transition the illicit market to the
legal, regulated and taxable markets. Canadian companies were the first to
create global cannabis infrastructure and are poised to compete with other
emerging export centers, including Israel, Greece and Colombia.
The United States has been the global leader in cannabis innovation, including
new genetics, cultivation techniques, derivative products, and delivery methods.
U.S. based companies are beginning to move into the global arena.
The opportunity represented by legal cannabis is significant, but many countries
limit the number of legal participants and have regulatory policies that are
still evolving, leading to high overall risk and barriers to entry.
As governments in newly legalized markets lay the foundations for their nascent
industries, many lack or do not wish to regulate domestic cultivation and
production activity. This forms the foundation for a vibrant international
cannabis import-export sector.
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 is the first G-7 nation to fully legalize cannabis for medical and
recreational use. 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 infrastructure projects to produce
cannabis at costs lower than those in Canada.
To date, Canadian companies report exporting only several thousands of pounds of
cannabis to more than 20 different countries, collectively - demonstrating the
early stage of development of the global cannabis market, and by extension the
remaining opportunities.
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The United States
New Frontier Data forecasts that the legal U.S. markets will generate nearly
$19 billion in legal sales in 2020, growing to over $20 billion by 2022.
Cannabis remains federally illegal in the United States, even as support for
legal recreational cannabis remains above 60% in most reputable polls.
Regardless of the federal status of cannabis, currently 33 U.S. states have
enacted laws legalizing some form of medical cannabis, and 10 states and the
District of Colombia have legalized recreational use cannabis. The United States
has been the global leader in cannabis innovation, including new genetics,
cultivation techniques, derivative products, and delivery methods.
States with some type of legal medical cannabis laws include Arizona, Arkansas,
Connecticut, Delaware, Florida, Hawaii, Illinois, Georgia, Indiana, Iowa, New
Hampshire, Louisiana, Rhode Island, Minnesota, Missouri, Maryland, Montana,
Michigan, New Mexico, New York, North Dakota, New Jersey, Ohio, Oklahoma,
Vermont, Pennsylvania, Rhode Island, Texas, Utah, and West Virginia. States
permitted the sales of recreational or "adult-use" cannabis are Alaska,
California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon,
Vermont, and Washington. The District of Colombia (Washington D.C.) also permits
adult-use cannabis.
Europe
New Frontier Data estimates the European cannabis market (legal & illicit)
generates $69 billion USD annually, with France, Italy and Spain having the
greatest number of cannabis consumers, and Germany with the most robust medical
program to date.
With the U.S. political shift creating federal U.S. legalization optimism, the
U.S. marijuana market is projected to grow to $30-$37 billion by 2024. On the
other hand, with over twice the population of the U.S. and Canada combined,
Europe's cannabis market is projected to reach $146.37 billion by 2028.
There are almost 30 European countries that permit some form of legal medical
cannabis including, France, Italy, Germany, United Kingdom, Spain, Poland, Czech
Republic, Croatia, Cyprus, Denmark, Finland, Greece, Israel, Luxembourg, North
Macedonia, Malta, Netherlands, Norway, Poland, Romania, Switzerland, Turkey,
Ireland, Lithuania and Portugal. The European Union requires its member
countries to enforce the European Union Good Manufacturing Practices (GMP),
which detail the production standards for medicinal products. These standards
are typically stringent and can be costly for cannabis companies.
Israel and Greece
Israel has a small population but a long established history of legal medical
cannabis development. It continues as a leader with years in the development of
cannabis pharmaceuticals, and together with Greece the 2 are projected to form a
"Silicon Valley" network for the development of medical cannabis production to
service the European Markets and beyond.
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The Kaya™ Family of Brands
Kaya Holdings, Inc., "KAYS" or the "Company" a Delaware corporation, 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.
Currently Operational Brands (2014-2020)
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Next Stage Traditional (2020-2022)
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Next Stage Innovative (2020-2022)
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Note: The "Next Stage Traditional" and "Next Stage Innovative" brands are all
targeted for release over the 6-18 months. The Company is currently awaiting the
culmination of both the new licensing process and buildout of the Kaya Farms
Processing & Cannaceutical Production Facility in Eugene, Oregon, and the
pending license issuance of the Kaya Farms Ag Facility in Lebanon, Oregon to
finalize the release dates for these brands in Oregon. 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 shareholders accordingly as to revised
brand rollout dates (if any).
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The Kaya Shack™ Brand
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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.
Additionally, Kaya Holdings maintains an active third OLCC Marijuana Retail
License which it is seeking to move to its Eugene, Oregon Kaya Farms Indoor
Production and Processing Facility so that the Company may offer a "Kaya Farm
Store" and also serve as a retail delivery hub for Eugene, Oregon.
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 (15-15 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 all three of its
retail licenses and has a fleet of 4 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, and are looking to
expand this offering to other areas in Oregon if we are able to get an approval
on the transfer of our third retailer license.
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.
We expect delivery to extend our visibility, assist in building brand awareness,
and allow the Company to service a broader geographic territory.
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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 properties in
Oregon which details their history, current status and intended development, as
well as pictures of our crops and testing results for some of the cannabis and
cannabis products in our strain library.
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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 are presently in the process
of initiating Stage 1 construction and final licensing on the property to meet
the Spring 2022 growing season.
Management believes that the acquisition and 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 preroll 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 including Mexico, 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
project of Athens based Greekkannabis PC ("GKC") and KBI. GKC is a recently
formed 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.
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Kaya Kannabis Medical Cannabis Production Facility in Thebes, Greece (Project
Design Rendering
Project Description
Project Management envisages twelve 35,000 sq. feet (approximately 3,500 sq.
meters) of light deprivation greenhouses situated on fifteen acres of land, and
supported by an additional 50,000 sq. feet (approximately 5,000 sq. meters)
building for workspace, storage and administrative offices.
Under this model the farm will support 9,360 plants per greenhouse (for a total
plant count of 112,320 plants per harvest). There will be four harvests each
year for a total of 449,280 cannabis plants harvested annually. The Company
estimates total farm production, once completely constructed and operating at
full capacity, to be at a minimum of approximately 225,000 pounds of premium
grade cannabis annually.
Project Location
GKC has entered into an agreement to purchase 15 acres of land outside of Athens
in Thebes, Greece, approximately 75 minutes from Athens plans to establish the
Kaya Kannabis Cultivation and Processing Facility. The region offers optimal
growing conditions for cannabis and will enable the Company to produce
exceptional cannabis economically.
The project location provides:
§ 15 acres of flat land, with additional land available.
§ Full exposure to sunlight, without shadows cast.
§ Access to sufficient water, with operating wells.
§ Access to sufficient electricity.
§ Access to logistic routes.
§ Proximity to sufficient work force, both professional & labor.
§ Easy to secure (for security & safety).
§ Zoned for cannabis production.
§ Land is completely cleared and ready for construction.
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Kaya Kannabis Medical Cannabis Production Facility in Thebes, Greece (Project
Design Rendering)
Current Project Status & Developmental Timeline
On October 31, 2019 KAYS entered into an initial Memorandum of Understanding
("MOU") setting forth an agreement in principle for KBI to acquire a 50%
ownership interest in GKC, pursuant to which in consideration for KBI providing
the necessary expertise related to cannabis cultivation, processing, brand
development and other matters, KBI would have the right to acquire a 50%
ownership interest in GKC by reimbursing GKC for 50% of its license application
costs (with allowances for KBI's expenses as well).
On April 22, 2020 KAYS/KBI received confirmation from their Greek Counsel that
the Greek Government had awarded the crucial Installation License for the
project. There are three licenses required for the Facility- an "Installation
License" (which is the equivalent to a license to construct the facility), the
"Operating License" (available only after construction is completed), and the
"Production & Distribution License" (available from the EOF - the Greek
equivalent to the U.S. FDA - once production can be evaluated).
On January 13, 2021 KAYS reported that its majority-owned subsidiary KBI had
exercised its option to acquire a 50% Interest in GKC. The acquisition of the
50% interest in GKC is the cornerstone of KAYS' planned Kaya Kannabis project,
announced in late June 30, 2020 with the objective of establishing a beachhead
to enter the lucrative global medical cannabis market from Greece, a member of
the European Union.
On January 21, 2021 KAYS announced that the Joint Venture has named Dimitris
Bouras the Lead Engineer, and his firm, Whitestone MCI, the Chief Engineering
Group for the development and construction of the Company's planned cannabis
cultivation and processing facility in Thebes, Greece:
Dimitris Bouras has successfully been planning and constructing large
engineering projects internationally for 30 years, and serves as the CEO of
Whitestone, a firm founded in 2008 that is active in engineering, design,
construction and O&M of industrial, marine and commercial projects. Whitestone
MCI has been active in the Medical & Industrial Cannabis Industry since 2017 and
is a leading Engineering & EPC Contracting Company that offers total project
development services to GACP/EU GMP Standards. Whitestone MCI currently has
active projects in Greece, Cyprus, Portugal, North Macedonia, Poland and Africa.
On February 1, 2021 KAYS reported that the joint venture had engaged Dutch based
Orange Ridge Capital B.V. ("Orange Ridge") to raise up to $45 million for its
planned 15-acre cannabis cultivation and processing facility in Thebes, Greece:
Orange Ridge Capital B.V. ("Orange Ridge") is registered at the Dutch Authority
for the Financial Markets (AFM: Autoriteit Financiele Markten) and is registered
as an Alternative Investment Fund Manager (an "AIFMD") with the Dutch
Supervisory Authority in The Netherlands. Orange Ridge has comprehensive
expertise in sustainable real asset investments that require significant due
diligence and technical expertise, access to capital, and local partnerships in
strategic locations.
As an AIFMD, Orange Ridge's mission is to generate attractive investment returns
from high-quality sustainable real assets such as timberland, farmland,
agriculture, infrastructure, real estate, and renewable energy in Europe, the
Americas, and Australasia, and provides these sustainable real asset investment
solutions and strategies to a wide range of clients in Europe, the Middle East,
and the Americas, such as pension funds, insurance companies, sovereign wealth
funds, family offices, and investment consultants.
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Kaya Shalvah is the Israeli-based cultivation-for-export project cannabis
farming project of U.S. based Kaya Brands International, Inc ("KBI"), a majority
owned subsidiary of Kaya Holdings, Inc.
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Kaya Shalvah Cannabis Production Facility, Greenegeve Cannabis Ecosystem,
Yerucham, Isreal (Project Design Rendering)
Project Description
Kaya Shalvah will, at full capacity, comprise twenty light deprivation
greenhouses, each 35,000 sq. feet (approximately 3,500 sq. meters), situated on
25 acres of land, and supported by an additional 80,000 sq. feet (approximately
8,000 sq. meters) structure for workspace, storage and administrative offices.
Under this model the farm will support 9,360 plants per greenhouse (for a
full-capacity total plant count of 187,200 plants). There will be four harvests
each year for a total of 748,800 cannabis plants harvested annually. The Company
estimates total farm production, once completely constructed and operating at
full capacity, to be at least 374,400 pounds (169,825 kilos) of premium grade
cannabis annually. The targeted land is in Yerucham, Israel approximately 90
minutes from Tel Aviv.
Project Location- Greenegev Cannabis Ecosystem, Yerucham, Israel
Why Israel, and Why Yerucham
Among Israel's chief advantages, alongside its compatible climate, are its
tradition of agricultural sophistication and its status as perhaps the world's
premier cannabis research center. Israel has been a pioneer in cannabis R&D for
several decades, and has one of the highest per capita rates of medical cannabis
patients in the world. 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.
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.
The Company 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. The Company 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. 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. The process is estimated to take
between 6-9 months.
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Layout for Yerucham-based Greenegev Cannabis Center
Current Licensing & Project Status
In late 2019 and early 2020, KBI retained the services of the Tel Aviv based law
firms Zysman, Aharoni, Gayer and Sullivan Law, respectively, to assist the
Company in obtaining an Israeli medical cannabis cultivation license and an
Israeli license to export medical cannabis. Part of this process included the
establishment of our entity to do business in Israel (Kaya Shalvah) as well as
building out Kaya Shalvah's Board of Directors and Board of Advisors
(biographies listed below).
In early and mid 2020, the Company, through its attorneys, worked to prepare the
requisite paperwork for its cannabis cultivation license application. On
November 30, 2020 the Company submitted its application for its initial cannabis
cultivation license to the Ministry of Health, Division of Medical Cannabis, and
was advised that the review process would take 3 to 6 months.
On March 30, 2021 the Company confirmed that its Israeli subsidiary, Kaya
Shalvah (Kaya Farms Israel) 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 the Company permission to proceed with its plans to develop
commercial scale cannabis cultivation and processing site at the Green Negev
cannabis complex in Yerucham, Israel, pending a tender for the land.
The Company 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, the Company 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. Once the Company develops the site in accordance with all
Israeli regulations, and meets all requisite standards, the final cultivation
and processing licenses will be issued.
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The Company has 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.
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 the Company 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.
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The Company'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).
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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.
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.
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, and4
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 June 30, 2021 compared to three months ended June 30, June
30, 2020
Revenues
We had revenues of $239,198 for the three months ended June 30, 2021 which was
relatively unchanged as compared to revenues of $263,862 for the three months
ended June 30, 2020.
Cost of Goods Sold
Our cost of goods sold for the three months ended June 30, 2021 was $86,729
compared to cost of goods sold of $59,900 for the three months ended June 30,
2020. The increase in cost of goods sold was due to normal fluctuation in the
wholesale cannabis market as well as the fact that we have curtailed production
at our production and processing facility in Eugene while we await relicensing
of the facility and are temporarily purchasing more of our products from third
party vendors.
Salaries and Wages
Salaries and Wages decreased to $87,638 for the three months ended June 30, 2021
as compared to $93,167 for the three months ended June 30, 2020. The decrease of
$5,500 in salaries and wages was due to normal decrease in labor cost as well as
the fact that we have less staff while we await licensing of our production
facility in Lebanon.
Selling, General and Administrative Expenses
Selling, general and administrative increased to $204,198 for the three months
ended June 30, 2021 as compared to $164,871 for the three months ended June 30,
2020. The increase was primarily due increase in marketing and office expenses.
Professional Fees
Professional fees were $158,191 for the three months ended June 30, 2021, as
compared to $204,165 for the three months ended June 30, 2020. The decrease in
professional fees was a result of decreased costs in this category.
Gain or Loss on Impairment of Assets
Gain on impairment of assets was $13,259 for the three months ended June 30,
2021, as compared to $0 for the three months ended June 30, 2020.
Interest Expense
Interest expense remained relatively unchanged at $160,961 for the three months
ended June 30, 2021 from $162,483 for the three months ended June 30, 2020.
Amortization of Debt Discount
Amortization of debt discount was an expense of $70,094 for the three months
ended June 30, 2021, as compared income of $24,560 for the three months ended
June 30, 2020.
Derivative Liabilities Expense
Derivative liabilities increased to $186,017 for the three months ended June 30,
2021 from $143,282 for the three months ended June 30, 2020. The increase were
due to change in stock price as well as the volatility factors used in the
derivative calculations.
Change in Fair Value of Embedded Derivative Liabilities
Change in fair value of embedded derivative liabilities was a gain of $9,798,331
for the three months ended June 30, 2021 compared to an expense of $890,989 for
the three months ended June 30, 2020. These changes were due to change in stock
price as well as the volatility factors used in the derivative calculations.
Net Income attributed to Kaya Holdings
We had net income of $9,176,813 for the three months ended June 30, 2021, as
compared to a net loss of $1,424,895 for the three months ended June 30, 2020.
The majority of our net income during the three-month period ending June 30,
2021was a result of the derivative liabilities associated with our Convertible
Debt and a increase in our stock price as well as the volatility factors used in
the derivative calculations. The non-controlling interest for the three months
ended June 30, 2021 and 2020 was a loss of $79,853 and a loss of $5,540
respectively.
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Six months ended June 30, 2021compared to six months ended June 30, June 30,
2020
Revenues
We had revenues of $476,216 for the six months ended June 30, 2021 as compared
to revenues of $499,173 for the six months ended June 30, June 30, 2020. The
slight decrease in revenue is due to the normal fluctuation in the market and we
are evaluating the effect of the COVID 19 pandemic.
Cost of Goods Sold
Our cost of goods sold for the six months ended June 30, 2021 was $162,543
compared to cost of goods sold of $108,787 for the six months ended June 30,
June 30, 2020. The increase in cost of goods sold was due to normal fluctuation
in the wholesale cannabis market and revised pricing policies.
Salaries and Wages
Salaries and Wages decreased to $174,621 for the six months ended June 30, 2021
as compared to $234,847 for the six months ended June 30, June 30, 2020. The
decrease in salaries and wages was due to a reduction in staffing from the
consolidation of retail outlets and reduced operations.
Selling, General and Administrative Expenses
Selling, general and administrative increased to $399,848 for the six months
ended June 30, 2021 as compared to $364,429 for the six months ended June 30,
June 30, 2020. The increase was primarily due increase in marketing and office
expenses.
Professional Fees
Professional fees were $365,905 for the six months ended June 30, 2021 as
compared to $379,471 for the six months ended June 30, June 30, 2020. The
decrease in professional fees was primarily related to decreases in expenses for
accounting, auditing and consulting.
Interest Expense
Interest expense and debt amortization expense increased to $310,820 for the six
months ended June 30, 2021 from $299,933 for the six months ended June 30, June
30, 2020. The increase was related to an increase debt incurred over the past 12
months for expansion of our operations.
Derivative Liabilities Expense
Derivative liabilities expense increased to $566,080 for the six months ended
June 30, 2021 from $172,169 for the six months ended June 30, June 30, 2020. The
increase was due to change in stock price as well as the volatility factors used
in the derivative calculations.
Change in Fair Value of Embedded Derivative Liabilities
Change in fair value of embedded derivative liabilities was a gain of $5,262,894
for the six months ended June 30, 2021 compared to a loss of $956,759 for the
six months ended June 30, June 30, 2020. These changes were due to change in
stock price as well as the volatility factors used in the derivative
calculations.
Net Income attributed to Kaya Holdings Inc.
We had net income of $ 3,591,152 for the six months ended June 30, 2021 as
compared to a net loss of $2,082,662 for the six months ended June 30, June 30,
2020.
The majority of our net income during the six months ended June 30, 2021 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 six months ended
June 30, 2021 and June 30, 2020 was a loss of $65,453 and $57,776 respectively.
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Liquidity and Capital Resources
May 2017 Financing
On May 11, 2017, we entered into a second financing agreement with Cayman
Venture Capital Fund (the "Institutional Investor") which had previously
completed approximately $3.3 Million in in financing as listed in the 2018 10-K
and previous filings to provide the Company with up to an additional $5.8
million in convertible note funding (the " May 2017 Notes ") through July 31,
2018 (the " May 2017 Financing Agreement "). The May 2017 Financing Agreement
was amended as of July 31, 2017, to increase the amount of funding available to
the Company thereunder to $6.3 million and to extend the time period for such
funding to May 31, 2019 and was subsequently amended as of November 15, 2017 and
as of March 31, 2018, to further increase the amount of funding available to the
Company thereunder to $7.75 million and to provide for the remaining $5.8million
in principal amount of May 2017 Notes to be (a) convertible into shares of the
Company's common stock at conversion prices ranging from $0.03 to $0.11 pursuant
to the terms of each May 2017 Note as described below; and (b) to extend the
time period for such funding to April 30, 2020.
Pursuant to an additional agreement reached as of March 31, 2018, KAYS and the
Institutional Investor agreed that effective as of January 1, 2019, (a) the
maturity date of all then outstanding Company promissory notes held by the
Institutional Investor and its affiliate, NWP Finance LTD, will be extended from
January 1, 2019 to January 1, 2020; (b) all of the $1.75 million in principal
amount of May 2017 Notes currently outstanding and the remaining $5.8 million in
principal amount of May 2017 Notes which may be issued under the Agreement, as
amended, are to be secured by a mortgage lien on the Company's 26-acre Lebanon,
Oregon property, substantially similar in form and substance to the mortgage
securing the $500,000 in principal amount of $0.03 Secured Notes purchased by
the Institutional Investor, with the caveat that the property, improvements or
rights to utilize them cannot be directly or indirectly leased, assigned or
otherwise pledged to any entity without approval of the Institutional Investor,
and in the event that there is a change in control of the Company or its
subsidiaries the May 2017 Notes become immediately due and payable; and (c) the
Institutional Investor was be granted piggy-back registration rights with
respect to shares of the Company's common stock it may hold or is issuable upon
conversion of any Notes it or its Assigns may hold in the event the Company
files a Registration Statement on Form S-1 with the Securities and Exchange
Commission under the Securities Act of 1933, as amended to sell shares of its
common stock or permit the resale by shareholders of previously issued shares of
common stock, up to a maximum of 30% of the shares registered under such
registration statement.
Effective as of January 20, 2019, the Agreement was further amended to: (a)
extend the due dates for funding due under the Agreement for each of the
remaining trenches (including the $420,000 remaining "$0.03" Notes that were due
to expire December 31, 2018) by six (6) months; (b) agree to extend the maturity
date all then outstanding Company promissory notes held by the Institutional
Investor and its affiliate, NWP Finance LTD, from January 1, 2020 to January 1,
2021; and (c) pursuant to price adjustment features in the outstanding Notes
held by the Institutional Investor, the Company confirmed that all outstanding
Notes with a conversion price greater than $0.03 held by the Institutional
Investor would be lowered to $0.03 per share at time of conversion.
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Effective as of January 1, 2020, the Agreement was further amended to: (a)
extend the maturity date all then outstanding Company promissory notes held by
the Institutional Investor and its affiliate, NWP Finance LTD, from January 1,
2021 to January 1, 2024; (b) notwithstanding item "a" upon the Company receiving
US$4,000,000.00 in new financing from sources other than the Holder, the Holder
shall have the option to have the Company allocate 10% of any additional
financing beyond this amount for purposes of early repayment of any Notes still
held by the Holder; (c) notwithstanding item "a" provide for an "Acceleration
Provision" in the event of a change in the event that Craig Frank is no longer
the CEO of the Company, and/or W. David Jones is no longer retained to provide
Business Consulting Services to the Company through BMN Consultants (either
through resignation, termination or through determination by the Board of
Directors that the respective party is medically incapable of conducting their
duties), then the Holder of this Note is entitled to enact the Acceleration
Provision by notifying the Company's Board of Directors or Corporate Counsel
which provides for the Maturity Date to be accelerated from January 1, 2024 to
ninety (90) days from receipt of said notice; (d) the limitation on conversion
of shares by the Holder to an amount less than 4.99% of the total issued and
outstanding stock of the Company is automatically deemed waived with respect to
a conversion of the Notes in connection with the occurrence of any of the
corporate events described in Section 8(h) of the Notes; (e) the corporate
events listed in Section 8(h) are also deemed to include a buyback/repurchase of
the Company's Shares by the Company, taking the Company "private", a tender
offer for the Company's shares by another entity or individual(s) or other such
action; and (f) the Conversion Price of the Notes will be adjusted if the
average closing price of the Company's common stock for the thirty (30) trading
days immediately preceding the date of the Company's receipt of the Holder's
Conversion Notice is less than $0.05 per share, the Conversion Price for the
shares shall be adjusted to the lesser of: sixty percent (60%) of the average
closing price of the Company's common stock for the thirty (30) trading days
immediately preceding the date of the Company's receipt of the Holder's Election
Notice reflecting such election, but in any event not less than $.01 per share,
OR $.03 per share, and in any event not to exceed such $.03 per share.
Effective as of July 22, 2020, pursuant to certain ratchet provisions within the
Notes and in consideration of further concessions and additional financing
assistance provided by the Institutional Investor, the Agreement was further
modified so that the Conversion Price of all Notes held by the Institutional
Investor and its affiliate, NWP Finance LTD have been reduced to $0.01 (0.15
post-split) per share, subject to certain adjustments in the event of stock
dividends, splits and similar recapitalization events.
As of the date of this report, the Institutional Investor has purchased an
aggregate of $3,251,,000 in principal amount of May 2017 Notes from the Company
under the May 2017 Financing Agreement, as amended to date.
January 2018 Financing
Effective January 22, 2018, and amended as of July 31, 2018 we entered into a
financing agreement with a high net worth investor (the " HNW Investor ") to
provide the Company with up to $1.4 million in convertible note funding (the "
January 2018 Notes ") through July 31, 2018 (the " January 2018 Financing
Agreement "). Pursuant to the January 2018 Financing Agreement, upon execution
of the January 2018 Financing Agreement, the HNW Investor purchased $100,000 in
principal amount of January 2018 Notes, which are convertible into shares of the
Company's common stock at a conversion price of $0.10 per share (the "$0.10
Notes ").
While the January 2018 Financing Agreement granted the HNW Investor the right to
acquire additional January 2018 Notes by certain deadlines if additional funding
was provided, no additional $0.10 Notes were purchased until the January 2018
Financing Agreement was amended in December, 2018 to allow the HNW investor the
right to purchase an additional $25,000 of January 2018 Notes, which are
convertible into shares of the Company's common stock at a conversion price of
$0.05 per share (the "$0.05 Notes ").
In January 2019 the Agreement was amended to lower the conversion price of the
previously purchased $0.10 Note to $0.05, and to modify terms of the $0.10 Note
to make them consistent with the May 2017 Financing Agreement executed with the
Institutional Investor, and to allow for the right of the HNW Investor to
acquire an additional $200,000 of January 2018 Notes, which are convertible into
shares of the Company's common stock at a conversion price of $0.03 per share
(the "$0.03 Notes "). In March 2019 the agreement was further amended to lower
the conversion prices of the previously issued $0.05 Notes to $0.03.
Effective as of January 1, 2020, the Agreement was further amended to: (a)
extend the maturity date all then outstanding Company promissory notes held by
the High Net Worth Investor Institutional Investor to January 1, 2021 (b) the
limitation on conversion of shares by the Holder to an amount less than 4.99% of
the total issued and outstanding stock of the Company is automatically deemed
waived with respect to a conversion of the Notes in connection with the
occurrence of any of the corporate events described in Section 8(h) of the
Notes; (c) the corporate events listed in Section 8(h) are also deemed to
include a buyback/repurchase of the Company's Shares by the Company, taking the
Company "private", a tender offer for the Company's shares by another entity or
individual(s) or other such action; and (d) the Conversion Price of the Notes
will be adjusted if the average closing price of the Company's common stock for
the thirty (30) trading days immediately preceding the date of the Company's
receipt of the Holder's Conversion Notice is less than $0.05 per share, the
Conversion Price for the shares shall be adjusted to the lesser of: sixty
percent (60%) of the average closing price of the Company's common stock for the
thirty (30) trading days immediately preceding the date of the Company's receipt
of the Holder's Election Notice reflecting such election, but in any event not
less than $.01 per share, OR $.03 per share, and in any event not to exceed such
$.03 per share amount.
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Effective as of July 22, 2020, pursuant to certain ratchet provisions within the
Notes and in consideration of further concessions and additional financing
assistance provided by the Institutional Investor, the Agreement was further
modified so that the Conversion Price of all Notes held by the HNW Investor have
been reduced to $0.01 (0.15 post- split) per share, subject to certain
adjustments in the event of stock dividends, splits and similar recapitalization
events.
As of the date of this report, the Institutional Investor has purchased an
aggregate of $345,000 in principal amount of May 2017 Notes from the Company
under the January 2018 Financing Agreement, as amended to date.
All the above securities were issued pursuant to the exemption from registration
under the Securities Act afforded by Section 4(a)(2) thereof and Regulation D
thereunder.
Use of Proceeds
The proceeds from the offer and sale of the $2.1M Notes, the May 2017 Notes and
the January 2018 Notes, as well as any other financing transactions that the
Company may enter into are and will be used to fund the 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 Canada, Greece and Israel.
Plan of Operations
Management believes that further proceeds expected to be received from the above
described financings as well as any other 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 May 2017 Financing, the
January 2018 Financing or other 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
On May 31, 2021 a total of four (4) Notes representing an aggregate of $109,107
of Principal and Interest were converted into 727,375 shares of stock of the
Company by the HNW pursuant to the July 22, 2020 Amendment to the January 2018
Financing Agreement.
Additionally, on May 31, 2021 two (2) Notes representing an aggregate of $86,908
of Principal and Interest were converted into 579,390 shares of stock of the
Company.
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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KAYA HOLDINGS, INC. 
