UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the Fiscal Year Ended
OR
For the Transition Period from _________ to _________
Commission File No.
(Exact name of registrant as specified in its charter)
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM
For the Fiscal Year Ended
OR
For the Transition Period from _________ to _________
Commission File No.
(Exact name of registrant as specified in its charter)
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| (State of other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None
| Title of each class | Trading symbol(s) | Name of each exchange on which registered | ||
| None |
Securities registered under Section 12(g) of the Exchange Act:
None
(Title of Class)
Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X]
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X]
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements
for the past 90 days. [X]
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D.1(b).
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
[ ] Large accelerated filer [ ] Accelerated filer
[X]
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
The aggregate market value of the voting stock
held by non-affiliates of the Registrant was approximately $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were shares of common stock outstanding as of April 16, 2025.
DOCUMENTS INCORPORATED BY REFERENCE:
As used in this Form 10-K/A Amendment No. 1 to Annual Report on Form 10-K (this “Amendment”), the terms “ KAYS ,” “ the Company ,” “ we,” “ us ” and “ our ” refer to Kaya Holdings, Inc. and its owned and controlled subsidiaries, unless the context indicates otherwise.
Item 8. Financial Statements and Supplementary Data.
See the Index of Consolidated Financial Statements on page F-1 below.
Item 15. Exhibits and Financial Statement Schedules.
| a) | The following documents are filed as part of this Annual Report: | |
| (1) | Financial Statements – The following Consolidated Financial Statements of the Company are contained in Item 8 of this Annual Report: | |
| • | Reports of Independent Registered Public Accounting Firm | |
| • | Consolidated Balance Sheets at December 31, 2024 and 2023 | |
| • | Consolidated Statements of Operations for the years ended December 31, 2024 and 2023 | |
| • | Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2024 and 2023 | |
| • | Consolidated Statements of Cash Flows for the years ended December 31, 2024 and 2023 | |
| • | Notes to the Consolidated Financial Statements. | |
| (2) | Financial Statement Schedules were omitted, as they are not required or are not applicable, or the required information is included in the Consolidated Financial Statements. | |
| (3) | Exhibits – The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b32 under the Exchange Act: |
| Exhibit No. | Description of Exhibit | ||
| 3.1 | Certificate of Incorporation, as amended (1) | ||
| 3.2 | Bylaws, as amended(1) | ||
| 10.12 | 2022 Incentive Stock Plan(1) + | ||
| 10.2 | Form of 8% Convertible Promissory Note (1) |
| 14.1 | Insider Trading Policy(2) |
| 21.1 | Subsidiaries of Registrant (1) | ||
| 23.1 | Consent of M&K CPAS LLC(3) | ||
| 31.1 | Section 302 Certification(3) | ||
| 32.1 | Section 906 Certification(3) |
| (1) | Filed as an Exhibit to the Company’s Registration Statement on Form S-1, as amended (File No. 333-283570) and incorporated herein by reference. | |
| (2) | Previously Filed | |
| (3) | Filed herewith. |
+ Management compensation arrangement.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Form 10-K/A Amendment No. 1 to Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 19, 2025
| KAYA HOLDINGS, INC. | ||
| By: | /s/ Craig Frank | |
| Craig Frank | ||
| Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer | ||
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, this Annual Report on Form 10K has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
| Signature | Title | Date |
| / s/ Craig Frank | Chairman of the Board, President, Chief Executive Officer, | |
| Craig Frank | Acting Chief Financial Officer and Director (Principal Executive, Financial and Accounting Officer) | May 19, 2025 |
| /s/ Mitchel Chupak | Director | May 19, 2025 |
| Mitchel Chupak |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page | Page | |
| F-1 | Report
of Independent Registered Public Accounting Firm (FIRM ID: |
F-1 |
| F-2 | Consolidated Balance Sheets at December 31, 2024 and 2023 | F-2 |
| F-3 | Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 | F-3 |
| F-4 | Consolidated Statements of Comprehensive Income(Loss) for the Years Ended December 31, 2024 and 2023 | F-4 |
| F-5 | Consolidated Statements of Stockholders' Deficit Years Ended December 31, 2024 and 2023 | F-5 |
| F-6 | Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 | F-6 |
| F-7 | Notes to Consolidated Financial Statements | F-7 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Kaya Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Kaya Holdings, Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company had a net loss from continuing operations, net cash used in operations, and a lack of revenues to-date, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Derivative Liabilities
As discussed in Note 11, the Company borrows funds through the use of convertible notes payable that contain a conversion price that may be fixed or fluctuates with the stock price.
Auditing management’s estimates of the fair value of the derivative liability involves significant judgements and estimates given the embedded conversion features of the notes.
To evaluate the appropriateness of the fluctuation of the conversion price, the embedded conversion feature requires bifurcation from the host contract and is recorded as a liability subject to market adjustments as of each reporting period. Significant judgment is exercised by the Company in determining derivative liability values for these convertible note agreements, including the use of a specialist engaged by management.
We evaluated management’s conclusions regarding their derivative liability and reviewed support for the significant inputs used in the valuation model, as well as assessing the model for reasonableness. Additionally, we evaluated management’s disclosure of the Derivative Liabilities calculations in Note 11 of the consolidated financial statements.
/s/ M&K CPAS, PLLC
We have served as the Company’s auditor since 2018
The
April 29, 2025
F-1
Kaya Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2024 and 2023
| ASSETS | ||||||||
| (Audited) | (Audited) | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| CURRENT ASSETS: | ||||||||
| Cash and equivalents | $ | $ | ||||||
| Inventory | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| NON-CURRENT ASSETS: | ||||||||
| Right-of-use asset - operating lease | ||||||||
| Property
and equipment, net of accumulated depreciation of $ | ||||||||
| Goodwill | ||||||||
| Other Assets | ||||||||
| Total non-current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expense | $ | $ | ||||||
| Accounts payable and accrued expense-related parties | ||||||||
| Accrued interest | ||||||||
| Right-of-use liability - operating lease | ||||||||
| Taxable Payable | ||||||||
| Convertible
notes payable, net of discount of $ | ||||||||
| Notes payable | ||||||||
| Derivative liabilities | ||||||||
| Total current liabilities | ||||||||
| NON-CURRENT LIABILITIES: | ||||||||
| Accrued expense-related parties | ||||||||
| Accrued interest, non-current | ||||||||
| Notes payable | ||||||||
| Notes payable-related party | ||||||||
| Convertible
notes payable, net of discount of $ | ||||||||
| Total non-current liabilities | ||||||||
| Total liabilities | ||||||||
| STOCKHOLDERS' DEFICIT: | ||||||||
| Convertible preferred stock, Series D, par value $; shares authorized; and issued and outstanding as of December 31, 2024 and December 31, 2023, respectively | ||||||||
| Common stock , par value $; shares authorized; shares issued, outstanding as of December 31, 2024 and shares issued, outstanding as of December 31, 2023 , respectively | ||||||||
| Subscriptions payable | ||||||||
| Treasury stock, at cost, shares | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ( | ) | ( | ) | ||||
| Total stockholders' deficit attributable to parent company | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-2
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ( | ) | ||||||
| Operating expenses: | ||||||||
| Professional fees | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Amortization of debt discount | ( | ) | ( | ) | ||||
| Gain on sale of land | ||||||||
| Gain on sale of the license | ||||||||
| Change in derivative liabilities expense | ||||||||
| Other income (expense) | ||||||||
| Total other income (loss) | ( | ) | ||||||
| Net income from continuing operations before income taxes | ( | ) | ||||||
| Provision for Income Taxes | ||||||||
| Net income (loss) - from continued operations | ( | ) | ||||||
| Net Income (loss) from discontinued operations before tax | ( | ) | ||||||
| Provision for income taxes on discontinued operations | ( | ) | ( | ) | ||||
| Net income (loss) - from discontinued operations | ( | ) | ||||||
| Net income (loss) | ( | ) | ||||||
| Net income (loss) attributed to non-controlling interest | ( | ) | ||||||
| Net income (loss) attributed to Kaya Holdings, Inc. | ( | ) | ||||||
| Basic net (loss) income from continuing operations per common share | $ | ( | ) | $ | ||||
| Basic net (loss) income from discontinued operations per common share | $ | ( | ) | $ | ||||
| Basic net (loss) income per common share | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - Basic | ||||||||
| Diluted net (loss) income from continuing operations per common share | $ | ( | ) | $ | ||||
| Diluted net (loss) income from discontinued operations per common share | $ | ( | ) | $ | ||||
| Diluted net (loss) income per common share | $ | ( | ) | $ | ||||
| Weighted average number of common shares outstanding - Diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income(Loss)
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency adjustments | ( | ) | ||||||
| Comprehensive income (loss) | ( | ) | ||||||
| Comprehensive loss attributable to non-controlling interest | ( | ) | ||||||
| Comprehensive loss attributable to Kaya Holdings | ( | ) | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Deficit
For the years ended December 31, 2024 and 2023
| Additional Paid-in Capital | Accumulated Deficit | Accumulated Comprehensive Loss | Noncontrolling Interest | Total Stockholders' Deficit | |||||||||||||||||||||||
| Preferred Stock - Series C | Preferred Stock - Series D | Common Stock | Treasury Stock | Subscription Payable | |||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Amount | |||||||||||||||||||
| Balance, December 31, 2022 (Audited) | $ | |
$ | |
$ |
|
$ ( |
$ |
$ |
$ ( |
$ ( |
$ ( |
$ ( | ||||||||||||||
| Imputed interest | - | - | - | - | |
| |||||||||||||||||||||
| Settlement of derivative liabilities to additional paid in capital | - | - | - | - | |
| |||||||||||||||||||||
| Release of related party accruals and payable | - | - | - | - | |
| |||||||||||||||||||||
| Translation Adjustment | - | - | - | - | ( |
|
| ||||||||||||||||||||
| Net Income | - | - | - | - | |
|
| ||||||||||||||||||||
| Balance, December 31, 2023(Audited) | |
|
|
|
( |
|
|
( |
( |
( |
( | ||||||||||||||||
| Balance, December 31, 2023 (Audited) | |
|
|
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( |
|
|
( |
( |
( |
( | ||||||||||||||||
| Imputed interest | - | - | - | - | |
| |||||||||||||||||||||
| Common stock issued for services | - | - | |
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- | |
| ||||||||||||||||||||
| Common stock issued for services - related parties | - | - | |
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- | |
| ||||||||||||||||||||
| Common stock issued for acquiring the subsidiary | - | - | |
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- | |
| ||||||||||||||||||||
| Equity transaction (Sale of subsidiary's stock) | - | - | - | - | |
| |||||||||||||||||||||
| Translation Adjustment | - | - | - | - | ( |
( |
( | ||||||||||||||||||||
| Net Income | - | - | - | - | ( |
( |
( | ||||||||||||||||||||
| Balance, December 31, 2024 (Audited) | |
|
|
|
( |
|
|
( |
( |
( |
( | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Kaya Holdings, Inc. and Subsidiaries
Consolidated Statement of Cashflows
| (Audited) | (Audited) | |||||||
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Adjustment to non-controlling interest | ( | ) | ||||||
| Adjustments to reconcile net income / loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Imputed interest | ||||||||
| Loss(Gain) on lease extinguishment | ( | ) | ||||||
| Shares issued for services | ||||||||
| Shares issued for services - related parties | ||||||||
| Shares issued for acquisition - related parties | ||||||||
| Change in derivative liabilities | ( | ) | ( | ) | ||||
| Amortization of debt discount | ||||||||
| Loss(Gain) on sale of land | ( | ) | ||||||
| Loss(Gain) on sale of license | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expense | ( | ) | ||||||
| Inventory | ||||||||
| Right-of-use asset | ||||||||
| Deposit | ( | ) | ||||||
| Accrued interest | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Accounts payable and accrued expenses - Related Parties | ||||||||
| Right-of-use liabilities | ( | ) | ( | ) | ||||
| Deferred tax liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Net cash (used in)/provided by Discontinued Operations | ( | ) | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Proceeds from sales of fixed assets | ||||||||
| Proceeds from sales of business license | ||||||||
| Cash paid for impairment of right-of-use assets | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ||||||
| Proceeds from sales of subsidiary's stock | ||||||||
| Net cash provided by investing activities | ||||||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible notes | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effects of currency translation on cash and cash equivalents | ( | ) | ( | ) | ||||
| NET INCREASE (DECREASE) IN CASH | ||||||||
| CASH BEGINNING BALANCE | ||||||||
| CASH ENDING BALANCE | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||||||
| Interest paid | ||||||||
| NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Shares issued for investment | ||||||||
| Settlement of derivative liabilities | ||||||||
| Adoption of lease standard ASC 842 | ||||||||
| Release of related party accruals and payable | ||||||||
| Reclassification of accrued interest to notes principal | ||||||||
| Recognition of right of use assets and lease liabilities under ASC 842 | ||||||||
| Initial derivatives | ||||||||
| Convertible note balance adjustment | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
F-6
NOTE 1 – ORGANIZATION AND NATURE OF THE BUSINESS
Organization
Kaya Holdings, Inc. FKA (Alternative Fuels Americas, Inc.) (“KAYS”) is a holding company. The Company was incorporated in 1993 and engaged in a number of businesses until September, 2010. In October, 2010, the Company changed its name to Alternative Fuels Americas, Inc, in connection with the acquisition of a company by that name. The Company assumed its present name in March 2015, in connection with its commencement of operations in the legal cannabis market in Oregon.
The Company has four subsidiaries: Marijuana Holdings Americas, Inc., a Florida corporation (“MJAI”), which is majority-owned and was formed on March 27, 2014 to operate the Company’s cannabis retail business in Oregon. MJAI's operations were discontinued during the six months ended June 30, 2024, and the subsidiary is now classified as a discontinued operation (see Note 4). The Company retains full ownership of MJAI and is evaluating potential sale opportunities for its remaining assets in 2025. 34225 Kowitz Road, LLC, a wholly-owned Oregon limited liability company which held ownership of the Company’s 26 acre property in Lebanon, Oregon (inactive since February 28, 2023 when the subject property was sold), Kaya Brand International, Inc., a Florida Corporation (“KBI”) which is majority-owned and was formed on October 14, 2019 to expand the business overseas (active) and Fifth Dimension Therapeutics, Inc., a Florida corporation which is majority owned (“FDT ”) and was formed on December 13, 2022 to develop and maintain ownership of the Company’s planned Psychedelic Treatment Centers offering psilocybin treatments.
MJAI Oregon 1 LLC is the entity that holds the licenses for the Company’s retail store operations. MJAI Oregon 5 LLC is the entity that held the license application for the Company’s 26 acre farm property in Lebanon Oregon (property sold on February 28, 2023, inactive since that date).
KBI is the entity that holds controlling ownership interests in Kaya Farms Greece, S.A. (a Greek corporation) and Kaya Shalvah (“Kaya Farms Israel”, an Israeli corporation). These two entities were formed to facilitate expansion of the Company’s business in Greece and Israel respectively.
FDT is the entity that was formed to hold interests in psychedelic treatment facilities, with operations initially targeted for Oregon where FDT holds a 49% stake in FDT Oregon 1, LLC (“FDT1”, an Oregon limited liability company) and the Company has an irrevocable option to acquire the remaining 51% stake in FDT1 after the sunsetting in January 1, 2025 of Oregon’s residency requirements for majority ownership in entities that hold OHA issued psilocybin licenses. On September 5, 2024, the Company issued 1,000,000 shares of common stock to FDT Oregon 1 LLC owners who are also the Company’s related parties, to acquire the remaining 51% equity interest of FDT Oregon 1 LLC after January 1, 2025, as per the agreement.
Nature of the Business
In January 2014, KAYS incorporated MJAI, a wholly owned subsidiary, to focus on opportunities in the legal recreational and medical marijuana in the United States.
On July 3, 2014 opened its first Kaya Shack™ MMD in Portland, Oregon. Between April of 2014 and December 31, 2023, KAYS owned and operated four (4) Kaya Shack™ retail cannabis medical and recreational dispensaries, three (3) Medical Marijuana Grow sites licensed by the OHA and two (2) Recreational Marijuana grow sites licensed by the OLCC (all in Oregon). The statuses of these operations are as follows:
The first Kaya Shack™ (Kaya Shack™ Store 1) opened in 2014 in Portland, Oregon at the same address as an Oregon Liquor and Cannabis Commission (OLCC) licensed medical and recreational marijuana retailer. On March 11, 2024, the Company notified the Oregon Liquor Control Commission (the “OLCC”) that we were temporarily closing this location. The Company is currently evaluating redeploying this remaining dispensary license to serve as a delivery hub for Portland residents, tourists and The Sacred Mushroom™ guests, among others. As of June 30, 2024, the Company had ceased all retail cannabis operations under the MJAI subsidiary. Kaya Shack™ Store 1 remained inactive following the March 2024 temporary closure notice to the OLCC, and no further cannabis retail revenue was generated in the second half of the year. Accordingly, the Company has classified MJAI’s operations as discontinued as of year-end. See Note 4 for additional details on discontinued operations.
F-7
Kaya Shack™ Store 2 was closed in December, 2022 as part of a sale and surrender agreement that the Company entered into with the OLCC to resolve an Administrative Action filed by the OLCC (as previously disclosed in the Company’s Annual Report on form 10-K for the period ending December 31, 2021 filed on April 18, 2022 and in the Company’s Quarterly report for the period ending March 31, 2022 filed on May 16, 2022). Per the terms of the agreement the Company agreed to either enter into a purchase and sale agreement for its retail license in South Salem by February 1, 2023 (the renewal date) or surrender the license. On April 21, 2023 the Company concluded the sale of Store 2 for $210,000, less a 6% closing commission and minor closing expenses. After these expenses and paying $75,000 to resolve three non-performing store leases in South Oregon, the Company netted $118,900.
Kaya Shack™ Store 3 and Kaya Shack™ Store 4 were both closed due to consolidation moves by the Company in 2020 and 2021, respectively, and the Company let the licenses lapse.
In August of 2017, the Company purchased a 26-acre parcel in Lebanon, Linn County, Oregon for $510,000 on which we intended to construct a Greenhouse Grow and Production Facility (the “Property”) and filed for OLCC licensure. In August of 2022, the Company entered into an agreement (the “CVC Agreement”) with CVC International, Inc. (“CVC”), an institutional investor who holds certain of the Company’s Convertible Promissory Notes (the “Notes”), one of which was secured by a $500,000 mortgage on the Property. CVC released its lien on the Property to enable the Company to sell the Property and utilize the proceeds therefrom for the benefit of the Company and its shareholders, without having to repay CVC the $500,000 Note held by CVC. Additionally, CVC agreed to advance certain sums against the sale of the Property (“Advances”), which amounted to $270,000 pending the sale of the Property. On February 28, 2023 we sold the Property for a price of $769,500, less commissions and customary closing costs. The net proceeds of the sale were used to repay the advances plus interest (including an additional $100,000 borrowed from another lender interest) and the Company realized net proceeds of approximately $302,000,000. The land is reflected on the balance sheet as assets held for sale for the year ended December 31, 2022 at a value of $516,076. The land was sold in 2023.
On September 26, 2019, the Company formed the majority owned subsidiary Kaya Brands International, Inc. (“KBI”) to serve as the Company’s vehicle for expansion into worldwide cannabis markets. Between September of 2019 and March 31, 2024 KBI has formed majority-owned subsidiaries in both Greece and Israel and its local operating subsidiaries have acquired interests in various licenses and entities.
On December 13, 2022, the Company formed Fifth Dimension Therapeutics ™ (“FDT”, a Florida Corporation) to seek to provide psychedelic services to sufferers of treatment resistant mental health diseases such as depression, PTSD and other mental health disorders. On January 3, 2023 the Oregon Health Authority (the “OHA”) began to accept license applications, allowing each entity to own and operate one (1) Psilocybin manufacturing and processing facility for the production of Psilocybin Mushrooms and derived therapeutics (“Psilocybins”), and up to five (5) Psilocybin Facilitation Centers where clients would go to ingest Psilocybins and experience effects under the supervision of State Licensed Facilitators.
On January 25, 2023, the Company confirmed that attorney Glenn E.J. Murphy was welcomed as a founding member to the FDT Board of Directors. Glenn will assist FDT with introductions to pharmaceutical companies seeking data and access to psychedelic patients, as well as advising on the development of intellectual property, structure of potential joint ventures, funding opportunities, acquisitions, and other related endeavors. Glenn has twenty-five years of private and corporate practice, including ten years in-house with the Henkel Group and more than fifteen years in private practice, Glenn's experience has touched on most every aspect of intellectual property practice.
On March 13, 2023, Bryan Arnold (one of KAYS Vice Presidents and its longest serving Oregon Employee) completed his OHA Certified Psilocybin Education through the Changra Institute and became one of the first eighteen graduates to obtain Psilocybin Facilitator certification in the State of Oregon. Bryan’s Facilitation License application has been approved by the OHA, and he now may oversee up to five (5) Psilocybin Treatment Facilities and up to one (1) Psilocybin Production Facility. Additionally, the Company expects to enroll additional potential licensee candidates within the coming months to bolster its ranks of OHA Licensed Psilocybin Facilitators as it moves forward with plans to open its first Psilocybin Clinic, subject to completion of financing and regulatory approvals.
On November 14, 2023, the Company filed a license application with the Oregon Department of Health (the “OHA”) for the licensure of The Sacred Mushroom™, an approximately 11,000 square foot psilocybin treatment center located in Portland, Oregon which would serve as the Company’s flagship psilocybin facility.
F-8
On March 6, 2024, the OHA completed its Psilocybin Service Center License Inspection and itemized three (3) facility structural/layout items that they wanted addressed/modified prior to issuing the facility license. On May 7, 2024, the Company had been awarded its license by the Oregon Health Authority to operate its Portland, Oregon psilocybin treatment center, The Sacred Mushroom. On July 2, 2024, the Company announced that its licensed psilocybin treatment center, The Sacred Mushroom would open for business on July 5, 2024 and immediately commencing begin administering psilocybin treatments to eligible guests.
During the first half of 2024, the Company ceased operations of its retail marijuana business, MJAI, which was previously its primary revenue-generating subsidiary. MJAI's operations were discontinued during the six months ended June 30, 2024, and no revenue or operating activity has occurred since that date. The retail store was fully closed following the cessation of operations, and the Company no longer maintains involvement in or influence over MJAI’s business activities.
As a result of the closure of MJAI’s retail cannabis operations during the first half of 2024, those operations have been classified as a discontinued operation in accordance with ASC 205-20. The Company retains ownership of MJAI, and its assets and liabilities remain consolidated. Only revenues and direct expenses related to MJAI’s retail operations are included in discontinued operations. See Note 4 for further details.
NOTE 2 – LIQUIDITY AND GOING CONCERN
The Company’s consolidated financial statements as of December 31, 2024 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred net loss of $2,080,856, for the year ended December 31, 2024 and net income of $1,609,697 for the year ended December 31, 2023. The net loss due to the close of a retail shop in Oregon as the company focused on moving our cannabis business overseas and concentrated on the development of our Psychedelic Medicine business and the launch of The Sacred Mushroom™ facility in Portland, Oregon. At December 31, 2024 the Company has a working capital deficiency of $8,035,323 and is totally dependent on its ability to raise capital. The Company has a plan of operations and acknowledges that its plan of operations may not result in generating positive working capital in the near future. Even though management believes that it will be able to successfully execute its business plan, which includes third-party financing and capital issuance, and meet the Company’s future liquidity needs, there can be no assurances in that regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this material uncertainty. Management recognizes that the Company must generate additional funds to successfully develop its operations and activities. Management plans include:
| • | the sale of additional equity and debt securities, |
| • | alliances and/or partnerships with entities interested in and having the resources to support the further development of the Company’s business plan, |
| • | business transactions to assure continuation of the Company’s development and operations, |
| • | development of a unified brand and the pursuit of licenses to operate recreational and medical marijuana facilities under the branded name.
|
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation
The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
F-9
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Such estimates and assumptions impact both assets and liabilities, including but not limited to: net realizable value of accounts receivable and inventory, estimated useful lives and potential impairment of property and equipment, the valuation of intangible assets, estimate of fair value of share based payments and derivative liabilities, estimates of fair value of warrants issued and recorded as debt discount, estimates of tax liabilities and estimates of the probability and potential magnitude of contingent liabilities.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future non-conforming events. Accordingly, actual results could differ significantly from estimates.
Risks and Uncertainties
The Company’s operations are subject to risk and uncertainties including financial, operational, regulatory and other risks including the potential risk of business failure.
The Company has experienced, and in the future expects to continue to experience, variability in its sales and earnings. The factors expected to contribute to this variability include, among others, (i) the uncertainty associated with the commercialization and ultimate success of the product, (ii) competition inherent at other locations where product is expected to be sold (iii) general economic conditions and (iv) the related volatility of prices pertaining to the cost of sales.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Kaya Holdings, Inc. and all wholly and majority-owned subsidiaries. All significant intercompany balances have been eliminated.
Majority-owned subsidiaries:
Fifth Dimension Therapeutics, Inc. (a Florida Corporation)
FDT Oregon 1, LLC (an Oregon limited liability company)
Kaya Brands International, Inc. (a Florida Corporation)
Kaya Shalvah (“Kaya Farms Israel”, an Israeli corporation) majority owned subsidiary of KBI)
Kaya Farms Greece, S.A. (a Greek Corporation) majority owned subsidiary of KBI)
Marijuana Holding Americas, Inc. (a Florida Corporation)
MJAI Oregon 1 LLC
Non-Controlling Interest
The
company owned
The
company owned
F-10
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less. The Company had no cash equivalents.
Inventory
Inventory
consists of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in,
first-out method. The Company periodically reviews historical sales activity to determine potentially obsolete items and also
evaluates the impact of any anticipated changes in future demand. Total Value of Finished goods inventory as of December 31,
2024 is $
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Depreciation
of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from
Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.
Long-lived assets
The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flow.
Accounting for the Impairment of Long-Lived Assets
We evaluate long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Upon such an occurrence, the recoverability of assets to be held and used is measured by comparing the carrying amount of an asset to forecasted undiscounted net cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. For long-lived assets held for sale, assets are written down to fair value, less cost to sell. Fair value is determined based on discounted cash flows, appraised values or management's estimates, depending upon the nature of the assets.
Operating Leases
We lease our retail stores under non-cancellable operating leases. Most store leases include tenant allowances from landlords, rent escalation clauses and/or contingent rent provisions. We recognize rent expense on a straight-line basis over the lease term, excluding contingent rent, and record the difference between the amount charged to expense and the rent paid as a deferred rent liability.
Deferred Rent and Tenant Allowances
Deferred rent is recognized when a lease contains fixed rent escalations. We recognize the related rent expense on a straight-line basis starting from the date of possession and record the difference between the recognized rental expense and cash rent payable as deferred rent. Deferred rent also includes tenant allowances received from landlords in accordance with negotiated lease terms. The tenant allowances are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession.
F-11
Deferred rent is recognized when a lease contains fixed rent escalations. We recognize the related rent expense on a straight-line basis starting from the date of possession and record the difference between the recognized rental expense and cash rent payable as deferred rent. Deferred rent also includes tenant allowances received from landlords in accordance with negotiated lease terms. The tenant allowances are amortized as a reduction to rent expense on a straight-line basis over the term of the lease starting at the date of possession.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740, Accounting for Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, the Company considers tax regulations of the jurisdictions in which the Company operates, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are recorded related to deferred tax assets based on the “more likely than not” criteria of ASC 740.
ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
We are subject to certain tax risks and treatments that could negatively impact our results of operations
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly, and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
Provision for Income Taxes
We
recorded a provision for income taxes in the amount of $
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
| • | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. |
| • | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| • | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
F-12
| Fair Value Measurements at December 31, 2024 | ||||||
| Assets | Level 1 | Level 2 | Level 3 | |||
| Cash | $ |
$ - | $ - | |||
| Total Assets | |
- | - | |||
| Liabilities | ||||||
| Convertible
debentures, net of discounts of $ |
- | - | | |||
| Derivative liabilities | - | - | | |||
| Total liabilities | - | - | | |||
| Total | $ |
$ - | $ ( | |||
| Fair Value Measurements at December 31, 2023 | ||||||
| Assets | Level 1 | Level 2 | Level 3 | |||
| Cash | $ |
$ - | $ - | |||
| Total Assets | |
- | - | |||
| Liabilities | ||||||
| Convertible
debentures, net of discounts of $ |
- | - | | |||
| Derivative liabilities | - | - | | |||
| Total liabilities | - | - | | |||
| Total | $ |
$ - | $ ( | |||
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 11.
Embedded Conversion Features
The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Binomial option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
In July 2017, the FASB issued ASU 2017-11 Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivative and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendment also clarifies existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.
F-13
Prior to this Update, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
In August 2020, the FASB issued ASU 202006, Debt-Debt with Conversion and Other Options (Subtopic 47020) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 81540): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which is intended to simplify the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity's own equity. In this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated. The guidance allows for either full retrospective adoption or modified retrospective adoption. The guidance is effective for the Company in the first quarter of fiscal year 2025 and early adoption is permitted. The Company is evaluating the impact the adoption of this guidance will have on its condensed consolidated financial statements and related disclosures.
The amendments in Part 1 of this Update are a cost savings relative to former accounting. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.
The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.
The Company adopted this new standard on January 1, 2019; however, the Company needs to continue the derivative liabilities due to variable conversion price on some of the convertible instruments. As such, it did not have a material impact on the Company’s consolidated financial statements.
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Original Issue Discount
For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded as a debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.
Extinguishments of Liabilities
The Company accounts for extinguishments of liabilities in accordance with ASC 405-20 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized.
F-14
Stock-Based Compensation - Employees
The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.
If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
The fair value of share options and similar instruments is estimated on the date of grant using a Binomial Option Model option-pricing valuation model. The ranges of assumptions for inputs are as follows:
| • | Expected term of share options and similar instruments: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and employees’ expected exercise and post-vesting employment termination behavior into the fair value (or calculated value) of the instruments. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
| |
| • | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
| |
| • | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
| |
| • | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
|
F-15
Generally, all forms of share-based payments, including stock option grants, warrants and restricted stock grants and stock appreciation rights are measured at their fair value on the awards’ grant date, based on estimated number of awards that are ultimately expected to vest.
The expense resulting from share-based payments is recorded in general and administrative expense in the statements of operations.
Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services
In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvement to Nonemployee Share-Based Payment Accounting (Topic 718). The ASU supersedes ASC 505-50, Equity-Based Payment to Non-Employment and expends the scope of the Topic 718 to include stock-based payments granted to non-employees. Under the new guidance, the measurement date and performance and vesting conditions for stock-based payments to non-employees are aligned with those of employees, most notably aligning the award measurement date with the grant date of an award. The new guidance is required to be adopted using the modified retrospective transition approach. The Company adopted the new guidance effective January 1, 2019, with an immaterial impact on its financial statements and related disclosures.
The fair value of share options and similar instruments is estimated on the date of grant using a Binomial option-pricing valuation model. The ranges of assumptions for inputs are as follows:
| • | Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
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| • | Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
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| • | Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
| |
| • | Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.
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Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identifying the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
To confirm, all of our OLCC licensed cannabis retail sales operations are conducted and operated on a “cash and carry” basis- product(s) from our inventory accounts are sold to the customer(s) and the customer settles the account at time of receipt of product via cash payment at our retail store; the transaction is recorded at the time of sale in our point-of-sale software system. Revenue is only reported after the product has been delivered to the customer and the customer has paid for the product with cash.
To date the only other revenue we have received is for ATM transactions and revenue from this activity is only reported after we receive payment via check from the ATM service provider company.
F-16
Cost of Sales
Cost of sales represents costs directly related to the purchase of goods and third party testing of the Company’s products.
Related Parties
The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements.
The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Contingencies
The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows.
Uncertain Tax Positions
The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended December 31, 2024.
Subsequent Events
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.
F-17
Segment reporting
The Company operates as one segment, in which management uses one measure of profitability, and all of the Company’s long-lived assets and all of the revenues generated are primarily located in the United States of America. The Company does not operate separate lines of business or separate business entities with respect to any of its product candidates. Accordingly, the Company does not have separate reportable segments.
Discontinued operation
During the six months ended June 30, 2024, the Company ceased operations of its wholly owned subsidiary, MJAI, a retail marijuana dispensary based in Oregon. MJAI focuses on legal recreational and medical marijuana retaliation business. The Company evaluated the evolving trends and economic realities of the marijuana market, taking into consideration the purchase cost and market demand. The Company has determined that there is insufficient profit to be made in the marijuana business. Consequently, the Company took the decision to discontinue MJAI's business activities.
New Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.
Recently issued accounting pronouncements not yet adopted
In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements, once adopted.
In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (Subtopic 220-40). The ASU requires the disaggregated disclosure of specific expense categories, including purchases of inventory, employee compensation, depreciation, and amortization, within relevant income statement captions. This ASU also requires disclosure of the total amount of selling expenses along with the definition of selling expenses. The ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Adoption of this ASU can either be applied prospectively to consolidated financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the consolidated financial statements. Early adoption is also permitted. This ASU will likely result in the required additional disclosures being included in our consolidated financial statements once adopted. We are currently evaluating the provisions of this ASU.
In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments, which clarifies the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The amendments in this update are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact of this guidance on our consolidated financial statements.
Recently adopted accounting pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. Refer to Note 16, Segment Reporting and Information about Geographic Areas for the inclusion of the new required disclosures.
F-18
NOTE 4 – DISCONTINUED OPERATIONS
During the six months ended June 30, 2024, the Company ceased operations of its wholly owned subsidiary, MJAI, a retail marijuana dispensary based in Oregon. MJAI focuses on legal recreational and medical marijuana retaliation business. The Company evaluated the evolving trends and economic realities of the marijuana market, taking into consideration the purchase cost and market demand. The Company has determined that there is insufficient profit to be made in the marijuana business. Consequently, the Company took the decision to discontinue MJAI's business activities.
While the Company did not formally sell the MJAI business during the year ended December 31, 2024, operations were effectively discontinued during the second quarter of 2024, and the dispensary has remained closed since that time. Kaya has had no further operating activity or income from MJAI following the closure.
The Company plans to pursue a potential sale of the MJAI business and remaining assets in the first quarter of 2025. As a result of the closure and strategic shift in operations, the MJAI segment is considered a discontinued operation as defined under ASC 205-20, Presentation of Financial Statements – Discontinued Operations. The Company retains ownership of MJAI, and its assets and liabilities remain consolidated in the financial statements. The results of MJAI’s operations have been presented separately from continuing operations for all periods presented in the accompanying consolidated financial statements.
The following table presents the summary of operating results from discontinued operations for the year ended December 31, 2024, and 2023:
Marijuana Holdings Americas, Inc.
Consolidated Statements of Operations
| For The | For The | |||||||
| Year Ended | Year Ended | |||||||
| December 31, 2024 | December 31, 2023 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other income (expense): | ||||||||
| Gain on impairment of right of use assets | ||||||||
| Gain on sale of the license | ||||||||
| AP forgiveness | ||||||||
| Other income (expense) | ( | ) | ||||||
| Total other income (loss) | ||||||||
| Net income from discontinued operations before income taxes | ( | ) | ||||||
| Provision for Income Taxes | ( | ) | ( | ) | ||||
| Net income (loss) from discontinued operations | ( | ) | ||||||
Although MJAI’s operations ceased during the year 2024, the Company retained control of the subsidiary as of December 31, 2024. Accordingly, MJAI was not deconsolidated, and its assets and liabilities remain included in the Company’s consolidated balance sheet as of December 31, 2024 and 2023.
Cash Flow Disclosures from Discontinued Operations
For
the years ended December 31, 2024 and 2023, the MJAI discontinued operation had net cash used in operating activities of $
F-19
NOTE 5 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 2024 and December 31, 2023:
| December 31, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Vehicle | $ | $ | ||||||
| Computers | ||||||||
| Machinery and Equipment | ||||||||
| Furniture and Fixtures | ||||||||
| HVAC | ||||||||
| Land | ||||||||
| Leasehold improvements | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
expense totaled $
NOTE 6 – NON-CURRENT ASSETS
Other assets consisted of the following at December 31, 2024 and December 31, 2023:
| December 31, 2024 | December 31, 2023 | |||||||
| Other receivable | ||||||||
| Rent deposits | ||||||||
| Security deposits | ||||||||
| Total Non-current assets | ||||||||
During
the year ended December 31, 2024, our other receivables decreased $
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The accounts payable and accrued expenses consisted of the following at December 31, 2024 and December 31, 2023:
| December 31, 2024 | December 31, 2023 | |||||||
| Accounts payable | ||||||||
| Accrued expenses | ||||||||
| Total | ||||||||
NOTE 8 – CONVERTIBLE DEBT
These
debts have a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”
The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts
on convertible debt. Discounts have been amortized to interest expense over the respective term of the related note. In determining the
indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of
ranging from
F-20
See Below Summary Table
| Convertible Debt Summary | |||||||
| Debt Type | Debt Classification | Interest Rate | Due Date | Ending | |||
| CT | LT | 12/31/2024 | 12/31/2023 | ||||
| A | Convertible | X | $ |
$ | |||
| B | Convertible | X | |
| |||
| C | Convertible | X | |
| |||
| D | Convertible | X | |
| |||
| O | Convertible | X | |
| |||
| P | Convertible | X | |
| |||
| Q | Convertible | X | |
| |||
| S | Convertible | X | |
| |||
| T | Convertible | X | |
| |||
| CC | Convertible | X | |
| |||
| KK | Convertible | X | |
| |||
| LL | Convertible | X | |
| |||
| MM | Convertible | X | |
| |||
| NN | Convertible | X | |
| |||
| OO | Convertible | X | |
| |||
| PP | Convertible | X | |
| |||
| Convertible | X | |
| ||||
| RR | Convertible | X | |
| |||
| SS | Convertible | X | |
| |||
| TT | Convertible | X | |
| |||
| UU | Convertible | X | |
| |||
| VV | Convertible | X | |
| |||
| XX | Convertible | X | |
| |||
| YY | Convertible | X | |
| |||
| ZZ | Convertible | X | |
| |||
| AAA | Convertible | X | |
| |||
| BBB | Convertible | X | |
| |||
| DDD | Convertible | X | |
| |||
| EEE | Convertible | X | |
| |||
| GGG | Convertible | X | |
| |||
| JJJ | Convertible | X | |
| |||
| LLL | Convertible | X | |
| |||
| MMM | Convertible | X | |
| |||
| PPP | Convertible | X | |
| |||
| SSS | Convertible | X | |
| |||
| TTT | Convertible | X | |
| |||
| VVV | Convertible | X | |
| |||
| WWW | Convertible | X | |
| |||
| XXX | Convertible | X | |
| |||
| YYY | Convertible | X | |
| |||
| ZZZ | Convertible | X | |
| |||
| AAAA | Convertible | X | |
| |||
| EEEE | Convertible | X | |
- | |||
| FFFF | Convertible | X | |
- | |||
| GGGG | Convertible | X | |
- | |||
| HHHH | Convertible | X | |
- | |||
| IIII | Convertible | X | |
- | |||
| JJJJ | Convertible | X | |
- | |||
| KKKK | Convertible | X | |
- | |||
| LLLL | Convertible | X | |
- | |||
| MMMM | Convertible | X | |
- | |||
| NNNN | Convertible | X | |
- | |||
| Total Convertible Debt | |
| |||||
| Less: Discount | ( |
( | |||||
| Convertible Debt, Net of Discounts | $ |
$ | |||||
| Convertible Debt, Net of Discounts, Current | $ |
$ | |||||
| Convertible Debt, Net of Discounts, Long-term | $ |
$ | |||||
F-21
On February 28, 2023, the Company sold the Property for a price of $769,500, less commissions and customary closing costs. The net proceeds of the sale were used to repay the convertible notes described above, of which total principal was $370,000. On December 31, 2022, the Company and various noteholders agree to modify the maturity date to December 31,2026 of all notes that were due to mature on December 31, 2024. No other terms of the convertible notes were changed.
On January 23, 2024, the Company received $61,200 from selling 2.4 units to CVC International LTD, including $60,000 convertible debt and 120,000 FDT shares at $0.01 per share and total value was $1,200. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On January 31, 2024, the Company signed an agreement with a third-party individual to transfer one non-convertible promissory note, including $15,000 principal and $300 accrual interest to purchase 0.6 unit, which included $15,000 convertible note and 30,000 FDT shares which is $0.01 per share and total value was $300. The convertible notes interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On March 12, 2024, the Company received $150,000 from selling 6 units to CVC International LTD, including $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On March 15, 2024, one of a promissory non-convertible notes was expired. The Company signed a purchase agreement with this third-party individual to purchase 4.3 units using the matured note, including $100,000 principal and $96,500 accrual interest. The 4.3 units included $107,500 convertible note and 215,000 FDT shares which is $0.01 per share and total value was $2,150. The convertible notes interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On May 1, 2024, the Company received $130,000 deposit plus $23,000 accrued interest reinvest from selling 6 units to CVC International LTD. The 6 units included $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
F-22
On June 4, 2024, the Company received $150,000 deposit plus $3,000 accrual interest reinvest from selling 6 units to CVC International LTD. The 6 Units included $150,000 convertible debt and 300,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.08 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On July 22, 2024, the Company received $125,000 deposit plus $53,000 accrual interest and principal reinvest from selling 7 units to CVC International LTD. The 7 Units included $175,000 convertible debt and 350,000 FDT shares which is $0.01 per share and total value is $3,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On September 13, 2024, the Company received $125,000 deposit plus $130,000 accrual interest and principal reinvest from selling 10 units to CVC International LTD. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On October 29, 2024, the Company received $125,000 deposit plus $130,000 accrual interest and principal reinvest from selling 10 units to CVC International Ltd. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Additionally, this note has a one-time conversion price adjustment of $0.02 per share for the first $1,000,000 principal and/or accumulated interest converted by CVC or their assigns. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On December 4, 2024, the Company received $100,000 deposit plus $155,000 accrual interest and principal reinvest from selling 10 units to CVC International Ltd. The 10 Units included $250,000 convertible debt and 500,000 FDT shares which is $0.01 per share and total value is $5,000. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.0 per share. The Note is Due on December 31, 2026. This note has a price adjustment provision: if the stock price 20 days before the conversion notice proceeding is less than $0.16 per share, the conversion price should be adjusted to the less of: 50% of the average closing price or the historical price for the 20 trading days before proceeding the conversion notice, but in any event the conversion price should be not less than $0.02 per share or more than $0.08 per share. Additionally, this note has a one-time conversion price adjustment of $0.02 per share for the first $1,000,000 principal and/or accumulated interest converted by CVC or their assigns. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note.
On July 31, 2024, the Company entered into a convertible notes modification agreement with CVC to extend the due date to December 31, 2026.
F-23
NOTE 9 – NON-CONVERTIBLE DEBT
| December 31, 2024 | December 31, 2023 | |||||||
| Current non-convertible notes | ||||||||
| Non-current non-convertible notes | ||||||||
| Total non-convertible notes | $ | $ | ||||||
| Breakdown | ||||||||
| Note a | $ | $ | ||||||
| Note b | ||||||||
| Note c | ||||||||
| Note d | ||||||||
| Total non-convertible notes | ||||||||
(a) On September 16, 2016, the Company received a total of $31,661 to be used for equipment in exchange for a two year note in the aggregate amount of $31,661 with interest accruing at 18% per year and a 10% loan fee. The note is in default as of December 31, 2024 with an outstanding balance of $9,312.
(b) On June 12, 2023, the Company issued a 10% promissory note in the amount of $350,000 with 10% interest rate, payable to CVC International Ltd, secured by 10% of monthly total revenues from all sources of Kaya Holdings, Inc. and any of its subsidiaries. and the noteholder also received 10 Series A preferred shares in FDT, which are convertible into a total of 10% of the common shares. The due date of the note is June 12, 2025. At the end of September 2023, the company paid $5,000, which is 10% of the total revenues from all sources of Kaya Holdings, Inc to the Holder and the Holder agreed to reinvest it as the additional of the note. On October 6, 2023, the Company received another $145,000 from the same investor to increase the promissory note to $500,000 total. As of September 30, 2024, Cayman Venture Capital Fund reinvested $29,000 of accrued interest from promissory notes into convertible notes and FDT stock purchases. In connection with this reinvestment, the Fund executed three convertible promissory notes, each with a principal amount of $150,000, and received a total of 900,000 FDT shares. On July 22, 2024, $16,975 of accrued interest and $36,025 of principal were reinvested into an additional 10 units, which included $175,000 of convertible debt and 350,000 FDT shares. On September 13, 2024, $6,730 of accrued interest and $123,270 of principal were reinvested into an additional 10 units, which included $250,000 of convertible debt and 500,000 FDT shares. On October 29, 2024, $4,288 of accrued interest and $125,712 of principal were reinvested into an additional 10 units, which included $250,000 of convertible debt and 500,000 FDT shares. On December 4, 2024, $2,116 of accrued interest and $152,884 principal was reinvested into an additional 10 units, which included $250,000 convertible debt and 500,000 FDT shares. As of December 31, 2024, the outstanding balance of the note is $61,608.
(c) On August 28, 2023, the Company received $100,000 from the issuance of working capital loan to another investor. Interest is stated at 10%. The Note was matured on March 31, 2024 and the $100,000 principal and $9,650 accrual interest were transferred to $107,500 convertible note and $2,150 stocks of FDT.
(d) On December 15, 2023, the Company received $15,000 working capital loan from another investor. On January 31, 2024, the Company signed a purchase agreement with the investor to reclass the $15,000 principal to convertible note and $300 accrual interest to purchase 30,000 FDT shares.
| Related Party | ||||||||
| Loan payable - Stockholder, 0%, Due December 31, 2027 (1) | $ | $ | ||||||
| $ | $ | |||||||
| (1) |
F-24
NOTE 10 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has shares of preferred stock authorized with a par value of $, of which shares have been designated as Series C convertible preferred stock (“Series C” or “Series C preferred stock”). The Board has the authority to issue the shares in one or more series and to fix the designations, preferences, powers and other rights, as it deems appropriate.
Each
share of Series C has
Pursuant
to the terms and conditions of this Agreement, the Holders each agreed to
Each Share of Series D Preferred Stock is convertible, at the option of the holder thereof, at any time and from time to time, into one percent (1%) of the Company’s Fully Diluted Capitalization as of the Conversion Date.
Common Stock
On August 20, 2024, the Company filed an amendment to its Certificate of Incorporation with the Delaware Secretary of State increasing the number of shares of common stock that the Company is authorized to shares and the par value changed to $. Each share of common stock has one vote per share for the election of directors and all other items submitted to a vote of stockholders. The common stock does not have cumulative voting rights, preemptive, redemption or conversion rights.
On
September 5, 2024, the Board of Directors approved the issuance of
shares of common stock to various individuals for services
rendered to the Company. The shares were issued in accordance with Rule 144. The shares were valued at the market price of $
On
September 5, 2024, the Board of Directors approved the issuance of
shares of common stock to the officers and directors. And another
shares of common stock issued to FDT Oregon 1 LLC owners who
are also the Company’s related parties to acquire
As of December 31, 2024, there were shares of common stock outstanding and shares subscription payable.
Treasury Stock
As of December 31, 2024, the Company held shares of its own common stock as treasury stock, which are recorded at cost using the cost method in accordance with ASC 505-30, Treasury Stock. These shares were originally issued in 2015 as part of a consulting agreement and were returned to the Company in 2016 pursuant to a settlement agreement with the service provider.
Although
the shares were returned in 2016, they were not previously recorded as treasury stock. Upon review during the preparation of the 2024
financial statements, the Company determined that these shares should be properly reflected as issued but not outstanding. Accordingly,
as of December 31, 2024 and 2023,
shares are reported as treasury stock, with a total recorded
cost of $
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NOTE 11 – DERIVATIVE LIABILITIES
Effective January 1, 2019, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.
However,
due to a recognition of tainting, due to variable conversion price on some of the convertible notes, all convertible notes are considered
to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.”
The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts
on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated
value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt is summarized as follows:
| Balance as of December 31, 2023 | $ | |||
| Change in Derivative values | ( | ) | ||
| Initial derivative | ||||
| Balance as of December 31, 2024 | $ |
The Company recorded the debt discount to the extent of the gross proceeds raised and expanded immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.
The
Company recorded initial derivative liabilities of $
The
Company recorded a change in the value of embedded derivative liabilities gain of $
The
Company reclassified derivative liabilities of $
NOTE 12 – DEBT DISCOUNT
The Company recorded the debt discount to the extent of the gross proceeds raised and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.
Debt
discount amounted to $
The
Company recorded the amortization of debt discount of $
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NOTE 13 – RELATED PARTY TRANSACTIONS
At
December 31, 2014, the Company was indebted to an affiliated shareholder of the Company for $,
which consisted of $
principal and $
accrued interest, with interest accruing at %.
On January 2, 2014, the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $
In
2019, the Company entered into amended consulting agreements with Tudog International Consulting, Inc. which provides CEO services to
the Company through Craig Frank, an Officer of the Company and BMN Consultants, Inc. which provides business development and financial
consulting services to the Company through William David Jones, a non-officer Consultant to the Company. Pursuant to the amended consulting
agreements, each entity is entitled to monthly compensation of $
On
July 28, 2021, the Company announced that all terms had been satisfied. Pursuant to the terms of the settlement, Bruce Burwick surrendered
to KAYS
shares of our common stock issued to him in connection with
the transaction (
In
2023, The Tudog Group, BMN Consultants, Inc, Inc and 495 Oxford Consulting, Inc which all provide services to the Company through Craig
Frank and William David Jones, forgiven totally $
On September 5, 2024, the Board of Directors approved the issuance of shares of common stock to FDT Oregon 1 LLC owners who are also the Company’s related party to acquire equity interest of FDT Oregon 1 LLC.
On September 15, 2022, the Company approved the 2022 Equity Incentive Plan, which provides for equity incentives to be granted to the Company’s employees, executive officers or directors or to key advisers or consultants. Equity incentives may be in the form of stock options with an exercise price not less than the fair market value of the underlying shares as determined pursuant to the 2022 Incentive Stock Plan, restricted stock awards, other stock based awards, or any combination of the foregoing. The 2022 Incentive Stock Plan is administered by the board of directors. The remaining balance of the shares available in the plan is shares.
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Operating Leases
The Company has several operating leases for an office in Fort Lauderdale, Florida, the Sacred Mushroom Psilocybin Service Center in Portland, Oregon, an apartment used by Officers and Consultants for the Company in Portland, Oregon when they are working in Portland and one retail store locations in Oregon under arrangements classified as leases under ASC 842.
Effective
June 1, 2019,
Effective
May 15, 2014,
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On
September 21, 2023,
The
Company has escrowed $
The
Company has right-of-use assets of $
Rent
expenses for the year ended December 31, 2024 and 2023 were $
| Maturity of Lease Liabilities at December 31, 2024 | ||
| Amount | ||
| 2025 | | |
| 2026 | ||
| Total lease payments | ||
| Less: Imputed interest | ( | |
| Present value of lease liabilities | $ | |
| Operating Lease Liability | Remaining months | Weighted average | |||
| As of December 31, 2024 | remaining term-months | ||||
| |
|
||||
| |
|||||
Legal Proceedings
On
October 17, 2024, the Company reached a settlement agreement with P3 Distributing L.L.C. in connection with a lawsuit filed in the Marion
County Circuit Court, Case No. 24CV08588. Under the terms of the settlement, the Company is required to make monthly payments of $
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Note 16 - SEGMENT REPORT
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company concluded that the Company’s CODM is CEO.
In accordance with ASC 280-10, Segment Reporting: Overall, the CODM reviews the consolidated results of operations when making decisions about allocating resources and assessing the performance of the Group as a whole; hence, the Company has only one operating segment.
As disclosed in Note 4 of the consolidated financial statements, during the six months ended June 30, 2024, we ceased operations of our MJAI retail marijuana business, which had historically represented our primary operating segment. Following the closure of MJAI, we received no additional income from the business and no longer engage in any operating activity related to that segment. Although the Company has retained full ownership of MJAI as of December 31, 2024, we intend to pursue the sale of MJAI and its related assets in the first quarter of 2025.
| For Years ended December 31, 2024 | For Years ended December 31, 2023 | |||||||
| Gross Profit | ( | ) | ||||||
| Less: | ||||||||
| Professional fees | ||||||||
| Salaries and wages | ||||||||
| General and administrative | ||||||||
| Interest expense | ||||||||
| Amortization of debt discount | ||||||||
| Change in derivative liabilities expense | ( | ) | ( | ) | ||||
| Other Segment Items(a) | ( | ) | ( | ) | ||||
| Segment Net profit | ( | ) | ||||||
| Reconciliation of profit or loss | ||||||||
| Adjustments and reconciling items | ||||||||
| Provision for Income Taxes | ||||||||
| Net income (loss) from discontinued operations | ( | ) | ||||||
| Net income (loss) attributed to non-controlling interest | ( | ) | ||||||
| Consolidated net income | $ | ( | ) | $ | ||||
| (a) | Other segment items included in Segment net income include Gain on lease extinguishment, gain on sale of land, gain on sale of the license, AP forgiveness and other income (expenses). |
NOTE 17 - INCOME TAXES
We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024, and 2023 we have not recorded any uncertain tax positions in our financial statements.
The
effective US Federal Income Corporate Tax Rates for 2024 and 2023 are
The
Company has net operating loss carry forwards of approximately $
The Company has a deferred tax asset as shown in the following:
| Year Ending December 31, 2024 | Year Ending December 31, 2023 | |||||||||||||||||||||||||||
| Deferred Tax Asset | ||||||||||||||||||||||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||||||||||||||||||||||
| Net Deferred Tax Asset | ||||||||||||||||||||||||||||
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We are subject to certain tax risks and treatments that could negatively impact our results of operations
Section 280E of the Internal Revenue Code, as amended, prohibits businesses from deducting certain expenses associated with trafficking-controlled substances (within the meaning of Schedule I and II of the Controlled Substances Act). The IRS has invoked Section 280E in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state laws. Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted. While there are currently several pending cases before various administrative and federal courts challenging these restrictions, there is no guarantee that these courts will issue an interpretation of Section 280E favorable to cannabis businesses.
Provision for Income Taxes
We
recorded a provision for income taxes in the amount of $
Note 18 - SUBSEQUENT EVENTS
Events that occur after the balance sheet date but before the financial statements were available to be issued must be evaluated for recognition or disclosure. The effects of subsequent events that provide evidence about conditions that existed at the balance sheet date are recognized in the accompanying financial statements. Subsequent events, which provide evidence about conditions that existed after the balance sheet date, require disclosure in the accompanying notes. The Company evaluated subsequent events and transactions that occurred after the balance sheet date through the date that the consolidated financial statements are available to be issued, and advised of the following:
As of May 29, 2025 the Institutional Investor has delivered an additional $235k to the Company which is being applied to the purchase of a convertible promissory note. Interest on the note accrues at the rate of 10% per annum. The note and accrued interest is convertible at any time prior to maturity (December 31, 2026) at the option of the Institutional Investor into shares of the Company’s common stock, at a conversion price of $0.08 per share.
In addition to customary adjustments, for stock splits, stock dividends and other recapitalization events, the conversion price and number of shares issuable upon conversion of the note is subject to adjustment if the market price of the Company’s common stock 20 days before notice of conversion is given is less than $0.16 per share, in which case, the conversion price would be adjusted to the lesser of 50% of the average closing price or the historical price for the 20 trading days before receipt of the conversion notice, but in no event, less than $0.02 per share or more than $0.08 per share.
In the event that the Maker completes an issuance or sale of common stock of the Company at a price lower than the Conversion Price any time before this Note is repaid or converted into common stock of the Company (whether via an acquisition transaction, debt conversion, a bona fide public offering, or a sale of restricted stock or any other form of exemption available to the Company) then the Exercise Price of the option shall be adjusted to that price for the remaining term of the Note.
Additionally, in the event that the Maker completes an issuance or sale of Preferred Shares, Debt, etc. (the "Other Debt Or Securities")or securities of one of its subsidiaries, then the Payee shall have the right to convert the Note into the Other Debt Or Securities, or securities of one of its subsidiaries on the same terms as those offered to any other investor using any Balance Due owed to Payee at that time.
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