Kaya Holdings, Inc. - Quarter Report: 2021 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended March 31, 2021
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from
__________to __________
Commission File No.: 333-177532
KAYA HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware | 90-0898007 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
915 Middle River Drive, Suite 316
Ft. Lauderdale, Florida 33304
(Address of principal executive offices)
(954)-892-6911
(Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation ST (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer [ ] | Accelerated Filer [ ] |
| Non-accelerated Filer [ ] | Smaller reporting company [X] |
| Emerging growth company [X] |
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. [ ]
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [X]
As of May 14, 2021, the Issuer had 14,422,741 shares of its common stock outstanding.
KAYA HOLDINGS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10 Q
Part I – Financial Information Page
| Item 1. Condensed Consolidated Financial Statements | Page |
| Condensed Consolidated Balance Sheet | 1 |
| Condensed Consolidated Statements of Operation | 2 |
| Condensed Consolidated Statements of Cash Flows | 3 |
| Statement of Stockholder’s deficit for the three month period ended March 31, 2021 and the year ended December 31, 2020 | 4 |
| Notes to Condensed Consolidated Financial Statements | 5 |
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 60 |
| Item 4. Controls and Procedures | 60 |
| Part II Other Information | |
| Item 1. Legal Proceedings | 62 |
| Item 1A. Risk Factors | 64 |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 64 |
| Item 3. Defaults Upon Senior Securities | 64 |
| Item 4. Mine Safety Disclosures | 64 |
| Item 5. Other Information | 64 |
| Item 6. Exhibits | 64 |
| Signatures | 64 |
In this Quarterly Report on Form 10-Q, the terms “Kaya Holdings,” “KAYS,” “the Company,” “we,” “us” and “our” refer to Kaya Holdings, Inc. and its subsidiaries, unless the context indicates otherwise.
Cautionary Note Regarding Forward Looking Statements
Information contained in this Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the ‘Exchange Act”). These forward-looking statements are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.
The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.
Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
Available Information
We file annual, quarterly and special reports and other information with the Securities and Exchange Commission (“SEC”) that can be obtained from the SEC by telephoning 1-800-SEC-0330. The Company’s filings are also available through the SEC’s Electronic Data Gathering Analysis and Retrieval System, known as EDGAR, through the SEC’s website (www.sec.gov).
Part I,
Item 1 Condensed Consolidated Financial Statements
Kaya Holdings, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
March 31, 2021 and December 31, 2020
The
accompanying notes are an integral part of these consolidated financial statements. Kaya
Holdings, Inc. and Subsidiaries Condensed
Consolidated Statements of Operations The
accompanying notes are an integral part of these consolidated financial statements Kaya
Holdings, Inc. and Subsidiaries Condensed
Consolidated Statement of Cashflows The
accompanying notes are an integral part of these consolidated financial statements. . Kaya
Holdings, Inc. and Subsidiaries Consolidated
Statements of Stockholders' Deficit For
the three month period ended March 31, 2021 and the year ended December 31, 2020 The
accompanying notes are an integral part of these consolidated financial statements. NOTE
1 – ORGANIZATION AND NATURE OF THE BUSINESS Organization Kaya
Holdings, Inc. FKA (Alternative Fuels Americas, Inc.) is a holding company. The Company was incorporated in 1993 and has engaged
in a number of businesses. Its name was changed on May 11, 2007 to NetSpace International Holdings, Inc. (a Delaware corporation)
(“NetSpace”). NetSpace acquired 100% of Alternative Fuels Americas, Inc. (a Florida corporation) in January 2010 in
a stock-for-member interest transaction and issued 6,567,247 shares of common stock and 100,000 shares of Series C convertible
preferred stock to existing shareholders. Certificate of Amendment to the Certificate of Incorporation was filed in October 2010
changing the Company’s name from NetSpace International Holdings, Inc. to Alternative Fuels Americas, Inc. (a Delaware corporation).
Certificate of Amendment to the Certificate of Incorporation was filed in March 2015 changing the Company’s name from Alternative
Fuels Americas, Inc. (a Delaware corporation) to Kaya Holdings, Inc. The
Company has four subsidiaries: Alternative Fuels Americas, Inc, a Florida corporation, which is wholly-owned, Marijuana Holdings
Americas, Inc., a Florida corporation (“MJAI”), which is majority-owned, 34225 Kowitz Road, LLC, a wholly-owned Oregon
limited liability company which holds ownership of the Company’s 26 acre property in Lebanon, Oregon on which it plans to
develop a legal cannabis cultivation and manufacturing facility, and Kaya Brand International, Inc. (KBI) a Florida Corporation
which the Company owns 85% of which was formed on October 14, 2019 to expand the business overseas MJAI
develops and operates the Company’s legal cannabis retail operations in Oregon through controlling ownership interests in
five Oregon limited liability companies: MJAI Oregon 1 LLC, MJAI Oregon 2 LLC (inactive), MJAI Oregon 3 LLC (inactive) , MJAI
Oregon 4 LLC (inactive) and MJAI Oregon 5 LLC. MJAI
Oregon 1 LLC is the entity that holds the licenses for the Company’s retail store operations and pending OLCC Production
and Processing license transfer applications for the 260 Grimes Street property in Eugene, Oregon. MJAI Oregon 5 LLC maintains
the Company’s pending OLCC Producer Application for the Company’s 26 acre farm property in Lebanon Oregon. 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. 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. MJAI has concentrated its efforts in Oregon, where through controlled Oregon limited liability
companies, it initially secured licenses to operate a medical marijuana dispensary (an “MMD”) and following legalization
of recreational cannabis use in Oregon, has secured licenses to operate four retail outlets and purchased 26 acres for development
as a legal cannabis cultivation and manufacturing facility. The Company has developed the Kaya Shack™ brand for its retail
operations and the Kaya Farms ™ brand for its cannabis gowing and processing operations. On
July 3, 2014 opened its first Kaya Shack™ MMD in Portland, Oregon. In April 2015, KAYS commenced its own medical marijuana
grow operations for the cultivation and harvesting of legal marijuana thereby becoming the first publicly traded U.S. company
to own a majority interest in a vertically integrated legal marijuana enterprise in the United States. In October 2015, concurrent
with Oregon commencing legal sales of recreational marijuana through MMDs, KAYS opened its second retail outlet in Salem, Oregon,
the Kaya Shack™ Marijuana Superstore. During 2015, the Company also consolidated its grow operations and manufacturing operations
into a single facility in Portland, Oregon. In
2016, Oregon began the process to transition legal marijuana sales from Oregon Health Authority (“OHA”) licensed MMDs
and grow operations to Oregon Liquor Control Commission (“OLCC”) licensed recreational marijuana retailers and producer
and processing facilities. Effective January 1, 2017, all retailers of recreational marijuana were required to have a recreational
marijuana sales license issued by the OLLC for each retail outlet operated. In
2016 the Company applied for OLLC licenses for its two initial Kaya Shack™ retail outlets (Portland, Oregon and South Salem,
Oregon), and also submitted license applications for its two new locations under construction and development at that time. In
late December 2016, we received our OLCC recreational license for the South Salem Kaya Shack™ Marijuana Superstore (Kaya
Shack™ OLCC Marijuana Retailer License #1) and recreational and medical sales continued without interruption from 2016 through
the present at that location. On
March 21, 2017, we received our North Salem Kaya Shack™ outlet (Kaya Shack™ OLCC Marijuana Retailer License #2) a
2,600-square foot Kaya Shack™ Marijuana Superstore in North Salem, Oregon, whereupon the location opened for business with
both recreational and medical sales. On
May 2, 2017, we received our OLCC recreational license for our Portland Kaya Shack™ outlet (Kaya Shack™ OLCC Marijuana
Retailer License #3) after a delay of approximately four months. During that period, we were limited to solely medical sales at
the Portland location. Upon receipt of Kaya Shack™ OLCC Marijuana Retailer License #3, recreational sales recommenced at
that location. During
August of 2017, the Company purchased a 26 acre parcel in Lebanon, Linn County, Oregon, on which we intend to construct an 85,000
square foot Kaya Farms™ Greenhouse Grow and Production Facility at the property. On
February 15, 2018, we received our OLCC recreational, medical and home delivery license for the Central Salem Kaya ShackTM
outlet (Kaya ShackTM OLCC Marijuana Retailer License #4) a 3,100-square foot Kaya ShackTM Marijuana
Superstore in Central Salem, Oregon. After various construction and permitting delays, On April 12, 2018, the location opened
for business with both recreational and medical sales. On
August 18, 2018, the Company had concluded the purchase of the Eugene, Oregon based Sunstone Farms manufacturing facility, which
was licensed by the OLCC for both the production of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles.
The purchase included a 12,000 square foot building housing and indoor grow facility, as well as equipment for growing and extraction
activity. The purchase price of $1.3 was paid for by the issuance of 12 million shares of KAYS restricted stock to the seller
at closing. Additionally, the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with
the Company, and became a Board Member of Kaya Holdings. While the shares carried a lock-up-restriction allowing for their staged
eligibility for resale over a 61-month period from the date of the purchase of the facility by KAYS, none of the shares have been
submitted for resale. In
mid-April, 2019 the Company was notified by Sunstone that the OLCC had filed an administrative proceeding and was proposing that
Sunstone’s licenses for the facility purchased by KAYS be cancelled, claiming that Sunstone had not filed paperwork correctly
with respect to the transaction and the historical ownership of Bruce Burwick, the seller of the facility to the Company. Neither
the Issuer nor any of its agents, consultants, employees or related entities was named as a respondent to the action and accordingly
could not respond to the proceedings. 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. On
November 4, 2019 the Company filed an 8-K announcing that its majority owned subsidiary, Kaya Brands International, Inc. (“KBI”),
had executed a memorandum of understanding (“MOU”) setting forth the terms for KBI’s acquisition of a 50% ownership
interest in Greekkannabis, PC (“GKC”), an Athens, Greece based cannabis company which at the time was awaiting issuance
of a medical cannabis cultivation, processing, and export license from the Greek government. In
February, 2020 the Company renewed the OLCC Marijuana Retailer Licenses #1, 2 and 4 listed above and did not renew OLCC Marijuana
Retailer License #3 and ceased operations at that location. Additionally, the Company is in the process of seeking to transfer
OLCC License #4 to either its 12,000 square foot property in Eugene, Oregon to facilitate a delivery hub for Eugene, Oregon or
other such location to make effective use of MJAI Retailer License #4. On
April 22, 2020 KAYS/KBI received confirmation from its Greek Counsel that the Greek Government had approved and issued the Crucial
Installation License for the GKC facility which is the subject of the previously announced MoU executed by and between KBI and
GKC. The license allows for construction of a medical cannabis cultivation and process facility which includes twelve (12) 35,000
square foot of light deprivation greenhouses and an additional 50,000 square foot building for workspace, storage and administrative
offices situated on fifteen acres of land in Thibes, Greece. On
June 7, 2020 Kaya Shalvah (“Kaya Farms Israel”) was incorporated by the Company’s Israel Counsel, Sullivan &
Worcester. KBI owns a majority of Kaya Farms Israel. On
October 15, 2020 the OLCC approved a settlement between the OLCC and Sunstone Marketing Partners that required that the licenses
for the Eugene Oregon based Sunstone Farms facility be sold to a third party (other than KAYS) or surrendered. For more information,
please see Note 16, Subsequent Events and Part I, Item 3, Legal Proceedings elsewhere in this filing. On
November 27, 2020 Kaya Farms Greece, S.A. (“KFG)” was incorporated by the Company’s Greek Counsel Dalakos, Fassolis
and Theofanopoulos of Piraeus, Greece. KBI owns a majority of KFG. On
December 31, 2020, the Company entered into a joint venture agreement with Greekkbannabis. The current joint venture arrangements
are in the developmental stage and therefore only the initial start-up costs are included in the financial statement for the year
ended December 31, 2020. For more information, please see Note, 16 Subsequent Events, and also information on Kaya Farms Greece
elsewhere in this filing. On
January 11, 2021, KAYS/KBI, through a majority owned subsidiary of KBI (Kaya Farms Greece or “KFG") and Greekkannabis
(“GKC") executed an agreement for KBI to acquire 50% of GKC. The terms are as follows: 1.
Prior to the execution of the transaction, the GKC shareholders owned a total of 320 shares (100%) of GKC. 2.
Pursuant to first section of the contract, KBI has initially acquired 80 shares of GKC (from the current shareholders) for
payment of 30,000 Euros- 20,000 Euros have been paid from the $31,688 (25,000 Euros) sent to Greece on December 31, 2020 and the
remaining 10,000 Euros is due to be paid by June 30, 2021. This leaves current shareholders on GKC side with 240 shares. 3.
GKC is in process of issuing an additional 160 shares of GKC to KFG in exchange for additional paid in capital by KFG of 16,000
Euros. At the conclusion of the process (minutes of meetings have to be published in Greek Government publications, etc which
will take a few months), KFG will own 50% of GKC (240 shares) and the current shareholders of GKC will own 50% (240 shares). 5.
An operating agreement is currently being drafted that allows for 5 board members (2 from KFG and 3 from GKC). Ilias will become
the President and Panos will become the vice president and Managing Director. Final terms will include the provision that a super
majority (80%) is required to enter into a transaction in excess of 100K Euros and also to issue new shares, encumber/sell
existing shares, enter into decisions regarding infrastructure, development and construction decisions, etc. NOTE
2 – LIQUIDITY AND GOING CONCERN The
Company’s consolidated financial statements as of March 31, 2021 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
a net loss of $5,520,208 for the three months ended March 31, 2021 and a net loss of $657,767 for the three months ended March
31, 2020. The increase in net loss is due to the changes in derivative liabilities, the increase in amortization of debt discount
and derivative liabilities expense, as wells as the company continues to have operating losses. At March 31, 2021 the Company
has a working capital deficiency of $25,551,438 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: 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. 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.
Fiscal
Year The
Company’s fiscal year-end is December 31. 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. Wholly-owned
subsidiaries: Majority-owned
subsidiaries: Kaya
Brands International, Inc. (a Florida Corporation) Kaya
Shalvah (“Kaya Farms Israel”, an Israeli corporation) majority owned subsidia y of KBI) Kaya
Farms Greece, S.A. (a Greek Corporation) majority owned subsidiary of KBI) Non-Controlling
Interest The
company owned 55% of Marijuana Holdings Americas until September 30, 2019. Starting October 1, 2019, Kaya Holding, Inc. owns 65%
of Marijuana Holdings Americas, Inc. As of December 31, 2019 Kaya owns 65% of Marijuana Holdings Americas, Inc. The
company owned 85% of Kaya Brands International, Inc. until July 31, 2020. Starting August 1, 2020, Kaya Holding, Inc. owns 65%
of Kaya Brands International, Inc. 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 March 31, 2021
is $61,980 and $47,618 as of December 31, 2020. Inventory allowance
and impairment were $0 and $0 as of March 31, 2021 and December 31, 2020, respectively. Property
and Equipment Property
and equipment is stated at cost, less accumulated depreciation and is 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 5-30 years
of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred. 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 flows. 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, 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. Earnings
Per Share In
accordance with ASC 260, Earnings per Share, the Company calculates basic earnings per share by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. Diluted earnings per share are computed if the Company
has net income; otherwise it would be anti-dilutive, and would result from the conversion of a convertible note. 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. 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: 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 7. 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. If the conversion feature does not require derivative treatment
under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion feature. 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 it 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 re-assessed 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. 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. The
amendments 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. For
entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding
financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a
numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder
of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on
an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update. 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. Beneficial
Conversion Feature For
conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion
feature" ("BCF") and related debt discount. When
the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective
debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt. 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 to 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 860-10 (formerly SFAS 140) “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. 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. 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. Stock-Based
Compensation – Non-Employees 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. 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. 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 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. 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 March 31, 2021. 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. Pursuant
to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued
when they are widely distributed to users, such as through filing them on EDGAR. Recently
Issued Accounting Pronouncements From
time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company
as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards
that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon
adoption. In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required
to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements.
ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors
are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial
statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, the Company adopted
this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical
expedients in transition. The Company elected the package of practical expedients’, which permitted the Company not to reassess
under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all
of the new standard’s available transition practical expedients. On
adoption, the Company recognized a right of use asset of $638,593, operating lease liabilities of $638,593, based on the present
value of the remaining minimum rental payments under current leasing standards for its existing operating lease. The
new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease
recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize
ROU assets or lease liabilities. In
July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480);
Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II)
Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain
Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” to simply the accounting for certain instruments
with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument
is indexed to its own stock, for purposes of determining liability or equity classification. Further, companies that provide earnings
per share (“EPS”) data will adjust the basic EPS calculation for the effect of the feature when triggered and will
also recognize the effect of the trigger within equity. The standard is effective for public companies for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this new
standard on January 1, 2019 and did not have a material impact on the Company’s consolidated financial statements. In
June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718)”: Improvements to Nonemployee
Share-Based Payment Accounting. This ASU was issued to expend the scope of Topic 718 to include share-based payment transactions
for acquiring goods and services from nonemployees. Previously, these awards were recorded at the fair value of consideration
received or the fair value of the equity instruments issued and were measured at the earlier of the commitment date of the date
performance was completed. The amendments in this ASU require nonemployee share-based payment awards to be measured at the grant-date
fair value of the equity instrument. ASU 2018-07 was effective for fiscal years, including interim periods within those fiscal
years beginning after December 15, 2018. The Company adopted ASU 2018-07 effective on October 1, 2019 and it did not have a material
impact on the Company’s consolidated financial statements. In
August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” This standard modifies
disclosure requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods
within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective
or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed
or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company
is currently assessing the impact of adopting this standard on its consolidated financial statements. In
December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard
simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including
interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the
impact of adopting this standard on its consolidated financial statements. In
August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” (“ASU 2020-06”).
ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including
convertible instruments and contracts on an entity’s own equity. The ASU is part of the FASB’s simplification initiative,
which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning
after December 15, 2023, and interim periods within those fiscal years. The Company is currently evaluating the impact ASU 2020-06
will have on its financial statements. NOTE
4 – PROPERTY, PLANT AND EQUIPMENT Property,
plant and equipment consisted of the following at March 31, 2021 and December 31, 2020: Depreciation
expense totaled of $30,262 and $55,675 for the three months ended March 31, 2021 and 2020, respectively. Due to the closure of
2 stores, the Company removed net asset of $173,658 and record loss of disposal of fixed asset $173,658 during the years ended
December 31, 2020. NOTE
5 – NON-CURRENT ASSETS Other
assets consisted of the following at March 31, 2021 and December 31, 2020: March
31, 2021 (Unaudited) December
31, 2020 (Audited) Due
to the closure of 2 stores, the Company expensed rent deposit of $11,016 during the years ended December 31, 2020. NOTE
6 – 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 0.11% to 0.47%, volatility ranging from 106% to 142%, trading prices ranging
from $0.020 per share to $0.66 per share and a conversion price ranging from $0.15 per share to $0.38 per share. The total derivative
liabilities associated with these notes were $22,454,404 at March 31, 2021 and $17,328,904 at December 31, 2020. See
Below Summary Table FOOTNOTES
FOR CONVERTIBLE DEBT SUMMARY TABLE (A) At
the option of the holder the convertible note may be converted into shares of the Company’s common stock at the lesser of
$0.40 or 20% discount to the market price, as defined, of the Company’s common stock. The Company is currently in discussions
with the lender on a payment schedule. The outstanding balance of this note is convertible into a variable number of the Company’s
common stock. 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 being 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 0.11% to 2.63%, volatility ranging from 84.63% to 243.37%, trading prices ranging from $0.42 per share to
$6.75 per share and a conversion price ranging from $0.34 per share to $6.15 per share. The balance of the convertible note at
March 31, 2021 including accrued interest and net of the discount amounted to $54,326. A
recap of the balance of outstanding convertible debt at March 31, 2021 is as follows: The
Company valued the derivative liabilities at March 31, 2021 at $30,449. The Company recognized a change in the fair value of derivative
liabilities for the three months ended March 31, 2021 of $14,624 which were added (credited) to operations. In determining
the indicated values at March 31, 2021, since the debt is in default, the company used the maximum value these embedded options
represent, with a trading price of $0.48, and conversion prices of $0.38 per share. (B),
(C), (D) All
these amended 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 0.05% to 2.59%, volatility ranging from 84.63% to 243.23%, trading
prices ranging from $0.42 per share to $6.15 per share and a conversion price ranging from $0.15 per share to $2.25 per share.
The Note and Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had
been extended to January 1, 2024. The balance of the convertible note at March 31, 2021 including accrued interest and net of
the discount amounted to $424,110. The derivative liability associated with this note as of March 31, 2021 were $1,176,014. During
2020, interest of $28,574 was capitalized. (O) On
March 31, 2016 the Company received $100,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest
is convertible into common shares at $0.15 per share In January 2020, the maturity date of the notes had been extended to January
1, 2024. 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 157.47%, trading prices ranging from $0.42 per
share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note at March 31, 2021 including
accrued interest and net of the discount amounted to $150,524. The derivative liability associated with this note as of March
31, 2021 were $417,370. During 2020, interest of $10,142 was capitalized. (P) On
July 13, 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 157.47%, trading prices ranging from $0.42 per
share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note at March 31, 2021 including
accrued interest and net of the discount amounted to $72,757. The derivative liability associated with this note as of March 31,
2021 were $201,741. During 2020, interest of $4,902 was capitalized. (Q) On
August 30, 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. 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 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging
from $0.42 per share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note at March
31, 2021 including accrued interest and net of the discount amounted to $71,769. The derivative liability associated with this
note as of March 31, 2021 was $199,001. During 2020, interest of $4,835 was capitalized. (S) On
December 1, 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. 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 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging
from $0.42 per share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note at March
31, 2021 including accrued interest and net of the discount amounted to $69,493. The derivative liability associated with this
note as of March 31, 2021 were $192,693. During 2020, interest of $4,682 was capitalized. (T) On
December 30, 2016 the Company received $250,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. 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 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices
ranging from $0.42 per share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note
at March 31, 2021 including accrued interest and net of the discount amounted to $344,842. The derivative liability associated
with this note as of March 31, 2021 were $956,177. During 2020, interest of $23,232 was capitalized. (BB) On
September 23, 2015 the Company received a total of $50,000 from an accredited investor in exchange for a two year note in the
aggregate amount of $50,000 with interest accruing at 10%. The note is convertible after September 23, 2015 and is convertible
into the Company’s common stock at a conversion rate of $0.15 per share. The market value of the stock at the date when
the debt becomes convertible was $1.17. The debt issued is a result of a financing transaction and contain a beneficial conversion
feature. The accrued interest of $5,000 was converted to 166,666 shares of common stock on September 15, 2019. The accrued interest
of $5,000 was paid in cash in the year of 2020. On January 1, 2019, due date of this note was extended until January 1, 2020.
The lender and the Company are in discussion to extend the maturity terms. No gain or loss on conversion was recorded as conversions
were made within the terms of agreement. The balance of the convertible note at March 31, 2021 including accrued interest and
net of the discount amounted to $56,222. The derivative liability associated with this note as of March 31, 2021 was $79,998. (CC) On
September 23, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the
aggregate amount of $100,000 with interest accruing at 10%. The note was convertible after September 23, 2015 and was convertible
into the Company’s common stock at a conversion rate of $.45 per share. The market value of the stock at the date when the
debt becomes convertible was $1.17. The debt issued is a result of a financing transaction and contain a beneficial conversion
feature. The balance of the convertible note at March 31, 2021 including accrued interest and net of the discount amounted to
$122,444. The derivative liability associated with this note as of March 31, 2021 was $174,225. On January 1, 2019, due date of
this note was extended until January 1, 2020. The lender and the Company are in discussion to extend the maturity terms. (KK)
On
January 4, 2017, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. . In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from
$0.42 per share to $4.05 per share and a conversion price of $0.15 per share. The balance of the convertible note at March 31,
2021 including accrued interest and net of the discount amounted to $206,707. The derivative liability associated with this note
as of March 31, 2021 was $573,156. During 2020, interest of $13,926 was capitalized. (LL)
On
January 20, 2017, the Company received $600,000 from the issuance of convertible debt. Interest is stated at The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from
$0.42 per share to $4.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest and net of
the discount amounted to $824,298. The derivative liability associated with this note as of March 31, 2021 were $2,285,603. During
2020, interest of $55,533 was capitalized. (MM)
On
January 31, 2017, the Company received $100,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from
$0.42 per share to $4.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest and net of
the discount amounted to $137,096. The derivative liability associated with this note as of March 31, 2021 were $380,143. During
2020 interest of $9,190 was capitalized. (NN)
On
February 7, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from
$0.42 per share to $4.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest and net of
the discount amounted to $684,540. The derivative liability associated with this note as of March 31, 2021 was $1,898,084. During
2020, interest of $46,118 was capitalized. (OO)
On
February 21, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 154.71%, trading
prices ranging from $0.42 per share to $0.30 per share. The balance of the convertible note at March 31, 2021 including accrued
interest and net of the discount amounted to $682,692. The derivative liability associated with this note as of March 31, 2021
was $1,892,964. During 2020, interest of $45,993 was capitalized. (PP)
On
May 11, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.59%, volatility ranging from 84.63% to 141.62%, trading prices ranging from
$0.42 per share to $4.05 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $672,269, net of the discount of $1,336. The derivative liability associated with this note as of December 31, 2021 was $1,864,062.
During 2020, interest of $45,291 was capitalized. (QQ) On
July 17, 2017, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility ranging from 84.63% to 141.62%, trading prices ranging from
$0.42 per share to $4.05 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $198,910, net of the discount of $481. The derivative liability associated with this note as of March 31, 2021 was $551,537.
During 2020, interest of $13,401 was capitalized. (RR) On
November 1, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility ranging from 84.63% to 141.62%, trading prices ranging from
$0.42 per share to $4.05 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $645,195, net of the discount of $1,959. The derivative liability associated with this note as of March 31, 2021 was $1,788,991.
During 2020, interest of $86,804 was capitalized. (SS) On
December 21, 2017, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8% The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility ranging from 84.63% to 141.62%, trading
prices ranging from $0.42 per share to $4.05 per share. The balance of the convertible note at March 31, 2021 including accrued
interest amounted to $191,725, net of the discount of $614. The derivative liability associated with this note as of March 31,
2021 were $531,614. During 2020, interest of $24,374 was capitalized. (TT) On
February 5, 2018, the Company received $300,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility ranging from 84.63% to 141.62%, trading prices ranging from
$0.42 per share to $7.35 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $380,026 , net of the discount of $1,218. The derivative liability associated with this note as of March 31, 2021 was $1,053,732.
During 2020, interest of $45,633 was capitalized. (UU) On
March 23, 2018, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility ranging from 84.63% to 141.62%, trading prices ranging from
$0.42 per share to $2.10 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $188,350, net of the discount of $562. The derivative liability associated with this note as of March 31, 2021 was $522,255.
During 2020, interest of $21,304 was capitalized. (VV) On
December 21, 2017 the Company received a total of $80,000 from an accredited investor in exchange for a two year note in the aggregate
amount of $80,000 with interest accruing at 10% per year. The note is due January 1, 2019 with monthly payments of principal and
interest. On January 30, 2018, the accredited investor advanced an additional $20,000. The total $100,000 including $333 of unpaid
interest was exchanged for a convertible note (Note VV). Interest is stated at 5%. The Note and Interest is convertible into common
shares at $0.15 per share. In January 2021, the maturity date of the notes had been extended to January 1, 2024. This note has
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 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 from 0.11% to 2.59%, volatility ranging from 84.63% to 141.62%, trading prices ranging from $0.42 per share to
$2.10 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted to $124,774, net of
the discount of $2. The derivative liability associated with this note as of March 31, 2021 was $345,967. During 2020, interest
of $8,385 was capitalized. (XX) On
May 29, 2018, the Company received $100,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.63%, volatility from 84.63% to 141.62%, trading prices ranging from $0.42
per share to $2.40 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted to $123,952,
net of the discount of $405. The derivative liability associated with this note as of March 31, 2021 were $343,692. During 2020,
interest of $12,734 was capitalized. (YY) On
July 18, 2018, the Company received $155,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.81%, volatility from 84.63% to 141.62%, trading prices ranging from $0.42
per share to $1.95 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted to $190,258,
net of the discount of $864. The derivative liability associated with this note as of March 31, 2021 was $527,544. During 2020,
interest of $18,039 was capitalized. (ZZ) On
August 13, 2018, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January
1, 2024. This note has 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 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 from 0.16% to 2.81%, volatility from 84.63% to 141.62%, trading prices ranging from $0.42
per share to $1.95 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted to $183,181,
net of the discount of $814. The derivative liability associated with this note as of March 31, 2021 were $507,923. During 2020,
interest of $16,603 was capitalized. (AAA) On
September 24, 2018, the Company received $95,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. This note has 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 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 from 0.16% to 2.81%, volatility from 84.63% to 142.66%, trading prices
ranging from $0.42 per share to $1.95 per share. The balance of the convertible note at March 31, 2021 including accrued interest
amounted to $115,053, net of the discount of $489. The derivative liability associated with this note as of March 31, 2021 were
$319,019. During 2020, interest of $9,641 was capitalized. (BBB) On
November 23, 2018, the Company received $80,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. This note has 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 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 from 0.16% to 2.81%, volatility from 84.63% to 141.62%, trading price
from $0.42 per share to $1.95 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $95,730, net of the discount of $523. The derivative liability associated with this note as of March 31, 2021 was $265,438.
During 2020, interest of $7,066 was capitalized. (CCC) On
December 21, 2018, the Company received $25,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and
Interest is convertible into common shares at $.75 per share. On January 22, 2019, the ratchet provision was activated due to
issuance of another convertible note. As such, the conversion price was decreased from $.75 per share to $.45 per share. As the
change is greater than 10%, the discount of $25,000 was recorded as a loss on extinguishment. The maturity date of the notes had
been extended to January 1, 2024. This note has 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 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 from 0.11% to 2.63%, volatility from 84.63% to 141.62%, trading
price of ranging from $0.42 to $1.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest
amounted to $29,622. The derivative liability associated with this note as of December 31, 2020 was $82,135. (DDD) On
January 22, 2019, the Company received $70,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $.45 per share. Note is due in January of 2021. This note has 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 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 from
0.16% to 2.59%, volatility from 84.63% to 141.62%, trading price of ranging from $0.42 to $1.65 per share. The balance of the
convertible note at March 31, 2021 including accrued interest amounted to $82,752, net of the discount of $18,843. The derivative
liability associated with this note as of March 31, 2021 was $229,453. During 2020, interest of $5,262 was capitalized. (EEE) On
February 11, 2019, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and
Interest is convertible into common shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended
to January 1, 2024. This note has 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 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 from 0.16% to 2.48%, volatility from 84.63% to 141.62%, trading price
of ranging from $0.42 to $1.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest amounted
to $176,602, net of the discount of $41,548. The derivative liability associated with this note as of March 31, 2021 was $489,680.
During 2020, interest of $10,619 was capitalized. (FFF) On
March 20, 2019, the Company received $15,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest
is convertible into common shares at $0.15 per share. Note is due in January of 2021. This note has 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 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 from
0.11% to 2.40%, volatility from 82.70% to 141.62%, trading price of ranging from $0.42 to $1.65 per share. The convertible debt
of $15,000 and accrued interest of $1,690 were converted to 111,266 shares on July 20, 2020. There was no gain or loss on conversion
as the conversion was done per terms of the note agreement. The derivative liabilities of $37,251 associated to this note was
reclassified to APIC. The balance of the convertible note at March 31, 2021 including accrued interest amounted to -0-. The derivative
liability associated with this note as of March 31, 2021 were -0-. (GGG) On
April 6, 2019 the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to
the May 2017 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January 1, 2024. This note has 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 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 from 0.16% to 2.40%, volatility from 82.70% to 141.62%, trading price of ranging from $0.42 to $1.65 per share.
The balance of the convertible note at March 31, 2021 including accrued interest amounted to $87,325, net of the discount of $10,166.
The derivative liability associated with this note as of March 31, 2021 was $242,134. During 2020, interest of $4,422 was capitalized. (HHH) On
April 22, 2019 the Company received $35,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the
January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The maturity date of the notes had been extended to January 1, 2024. This note has 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 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
from 0.11% to 2.40%, volatility from 82.70% to 141.62%, trading price of ranging from $0.42 to $1.65 per share. The balance of
the convertible note at March 31, 2021 including accrued interest amounted to $40,516, net of the discount of $20. The derivative
liability associated with this note as of March 31, 2021 were $112,343. (III) On
May 6, 2019 the Company received $25,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the
January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2021. This note has 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 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 from 0.11% to 2.40%, volatility
from 82.70% to 141.62%, trading price of ranging from $0.42 to $1.65 per share. The convertible debt of $25,000 and accrued interest
of $2,390 were converted to 182,600 shares on July 20, 2020. There was no gain or loss on conversion as the conversion was done
per terms of the note agreement. The derivative liabilities of $61,990 associated to this note was reclassified to APIC. The balance
of the convertible note at March 31, 2021 including accrued interest amounted to -0-. The derivative liability associated with
this note as of March 31, 2021 were -0-. (JJJ) On
May 21, 2019 the Company received $50,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. This note has 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 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 from 0.16% to 2.40%, volatility from 82.70% to 141.62%, trading
price of ranging from $0.42 to $1.65 per share. The balance of the convertible note at March 31, 2021 including accrued interest
amounted to $57,674, net of the discount of $16,126. The derivative liability associated with this note as of March 31, 2021 was
$159,919. During 2020, interest of $2,455 was capitalized. (KKK) On
June 5, 2019 the Company received $20,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the
January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2021. This note has 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 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 from 0.11% to 2.40%, volatility
from 82.70% to 141.62 trading price of ranging from $0.42 to $1.65 per share. The convertible debt of $20,000 and accrued interest
of $1,780 were converted to 145,200 shares on July 20, 2020. There was no gain or loss on conversion as the conversion was done
per terms of the note agreement. The derivative liabilities of $48,673 associated to this note was reclassified to APIC. The balance
of the convertible note at March 31, 2021 including accrued interest amounted to -0-. The derivative liability associated with
this note as of March 31, 2021 were -0-. (LLL) On
July 2, 2019 the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January 1, 2024. This note has 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 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 from 0.16% to 1.75%, volatility from 105.36% to 141.62%, trading price of ranging from $0.42 to $1.01 per share.
The balance of the convertible note at March 31, 2021 including accrued interest amounted to $85,753, net of the discount of $25,968.
The derivative liability associated with this note as of March 31, 2021 was $237,774. During 2020, interest of $2,992 was capitalized. (MMM) On
August 30, 2019 the Company received $50,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January 1, 2024. This note has 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 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 from 0.16% to 1.75%, volatility from 105.36% to 141.62%, trading price of ranging from $0.42 to $0.96 per share.
The balance of the convertible note at March 31, 2021 including accrued interest amounted to $56,457, net of the discount of $19,397.
The derivative liability associated with this note as of March 31, 2021 was $156,545. During 2020, interest of $1,348 was capitalized. (OOO) On
November 4, 2019, the Company received $10,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2021. This note has 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 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 from 0.11% to 1.59%, volatility
from 107.76% to 141.62%, trading price of ranging from $0.42 to $0.84 per share. The convertible debt of $10,000 and accrued interest
of $557 were converted to 70,380 shares on July 20, 2020. There was no gain or loss on conversion as the conversion was done per
terms of the note agreement. The derivative liabilities of $23,592 associated to this note was reclassified to APIC. The balance
of the convertible note at March 31, 2021 including accrued interest amounted to -0-. The derivative liability associated with
this note as of March 31, 2021 were -0-. (PPP) On
November 14, 2019 the Company received $95,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. In January 2020, the maturity date of the notes had been extended to January 1, 2024. This note
has 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 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 from 0.16% to 1.59%, volatility from 107.76% to 141.62%, trading price of ranging from $0.42 to $0.83 per share.
The balance of the convertible note at March 31, 2021 including accrued interest amounted to $105,529, net of the discount of
$42,584. The derivative liability associated with this note as of March 31, 2021 were $292,610. During 2020, interest of $979
was capitalized. (QQQ) On
December 19, 2019, the Company received $25,000 from the issuance of convertible debt to the High Net Worth Investor pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. The Note is Due in January of 2021. This note has 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 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 from 0.11% to 1.59%, volatility
from 107.76% to 141.62%, trading price of ranging from $0.42 to $0.90 per share. The convertible debt of $25,000 and accrued interest
of $1,146 were converted to 174,307 on July 20, 2020. There was no gain or loss on conversion as the conversion was done per terms
of the note agreement. The derivative liabilities of $58,430 associated to this note was reclassified to APIC. The balance of
the convertible note at March 31, 2021 including accrued interest amounted to -0-. The derivative liability associated with this
note as of March 31, 2021 were -0-. (RRR) On
January 8, 2020, the Company received $15,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The maturity date of the notes had been extended to January 1, 2024. This note has 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 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
from 0.11% to 1.55%, volatility from 115.62% to 141.62%, trading price of ranging from $0.42 to $0.81 per share. The balance of
the convertible note at March 31, 2021 including accrued interest amounted to $16,493, net of debt discount of $29. The derivative
liability associated with this note as of March 31, 2021 was $45,730. (SSS) On
January 10, 2020, the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.16% to 0.37%, volatility
from 115.62% to 141.62%, trading price of ranging from $0.42 to $0.75 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $82,315, net of debt discount of $39,223. The derivative liability associated
with this note as of March 31, 2021 was $228,242. (TTT) On
May 21, 2020, the Company received $80,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.16% to 0.28%, volatility
from 121.13% to 141.62%, trading price of ranging from $0.48 to $4.80 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $85,488, net of debt discount $50,623. The derivative liability associated with
this note as of March 31, 2021 was $237,041. (UUU) On
August 13, 2020, the Company received $20,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.11% to 1.55%, volatility
from 115.62% to 141.62%, trading price of ranging from $0.42 to $0.81 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $21,016, net of debt discount of $3,300. The derivative liability associated with
this note as of March 31, 2021 was $58,273. (VVV) On
September 24, 2020, the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.16% to 0.28%, volatility
from 121.13% to 141.62%, trading price of ranging from $0.48 to $4.80 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $78,074, net of debt discount of $10,840. The derivative liability associated
with this note as of March 31, 2021 was $216,483. (WWW) On
January 22, 2021, the Company received $60,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.16% to 0.28%, volatility
from 121.13% to 141.62%, trading price of ranging from $0.48 to $4.80 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $60,894, net of debt discount of $56,201. The derivative liability associated
with this note as of March 31, 2021 was $168,847. (XXX) On
February 28, 2021, the Company received $100,000 from the issuance of convertible debt to the High Net Worth Investor pursuant
to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common
shares at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.11% to 1.55%, volatility
from 115.62% to 141.62%, trading price of ranging from $0.42 to $0.81 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $100,679, net of debt discount of $97,011. The derivative liability associated
with this note as of March 31, 2021 was $279,163. (YYY) On
March 31, 2021, the Company received $50,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to
the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares
at $0.15 per share. The Note is Due in January of 2024. This note has 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 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 from 0.11% to 1.55%, volatility
from 115.62% to 141.62%, trading price of ranging from $0.42 to $0.81 per share. The balance of the convertible note at March
31, 2021 including accrued interest amounted to $50,000, net of debt discount of $50,000. The derivative liability associated
with this note as of March 31, 2021 was $138,640. NOTE
7 – NON-CONVERTIBLE DEBT March
31, 2021 (5)
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 default as of March 31, 2021
with an outstanding balance of $9,312.
ASSETS
(Unaudited)
(Audited)
March
31, 2021
December
31, 2020
CURRENT ASSETS:
Cash
and equivalents
$ 70,786
$ 43,162
Inventory-net of
allowance
61,980
47,618
Prepaid
expenses
13,674
12,135
Total
current assets
146,440
102,915
NON-CURRENT ASSETS:
Right-of-use
asset - operating lease
301,210
322,760
Property
and equipment, net of accumulated depreciation of $577,731 and $547,469
1,794,684
1,824,946
as of March 31, 2021
and December 31, 2020, respectively
Investment
in Subsidaries
37,830
31,688
Deposits
16,507
16,507
Total
other assets
2,150,231
2,195,901
Total
assets
$ 2,296,671
$ 2,298,816
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts
payable and accrued expense
$ 1,025,797
$ 988,247
Accounts
payable and accrued expense-related parties
911,412
846,111
Accrued
interest
741,710
616,329
Right-of-use
liabiliy - operating lease
130,243
149,896
Notes
payable-related party
250,000
—
Convertible
notes payable, net of discount of $0 and $79
175,000
363,243
Notes
payable
9,312
9,312
Derivative
liabilities
22,454,404
17,328,904
Total
current liabilities
25,697,878
20,302,042
LONG TERM LIABILITIES:
Notes
payable-related party
—
250,000
Convertible
notes payable, net of discount of $561,953 and $494,851
6,749,786
6,399,574
Right-of-use
liabiliy - operating lease
240,418
273,289
Total
long term liabilities
6,990,204
6,922,863
Total
liabilities
32,688,082
27,224,905
STOCKHOLDERS' EQUITY
(DEFICIT):
Convertible
preferred stock, Series C, par value $.001; 10,000,000 shares authorized;
100,000
and 100,000 issued and outstanding at March 31, 2021 and December 31, 2020
100
100
, respectively
Common stock , par
value $.001; 500,000,000 shares authorized;
14,422,741 shares
issued as of March 31, 2021 and 14,264,409 shares outstanding
as of December 31,
2020, respectively
14,423
14,265
Subscriptions
payable
163,630
163,880
Additional
paid in capital
20,680,034
20,639,456
Accumulated
deficit
(49,739,816 )
(44,219,608 )
Non-controlling
interest
(1,509,782 )
(1,524,182 )
Net
stockholders' deficit
(30,391,411 )
(24,926,089 )
Total
liabilities and stockholders' deficit
$ 2,296,671
$ 2,298,816 1
(Unaudited)
(Unaudited)
For The Three
For The Three
Months Ended
Months Ended
March 31, 2021
March 31, 2020
Net sales
$ 237,018
$ 235,311
Cost of sales
75,814
48,887
Gross profit
161,204
186,424
Operating expenses:
Professional fees
207,714
175,306
Salaries and wages
86,983
141,680
(Gain) Loss on impairment of assets
(31,671 )
—
General and administrative
195,650
199,558
Total operating expenses
458,676
516,544
Operating loss
(297,472 )
(330,120 )
Other income (expense):
Interest expense
(149,859 )
(137,450 )
Amortization of debt discount
(142,977 )
(138,776 )
Derivative liabilities expense
(380,063 )
(28,887 )
Change in derivative liabilities expense
(4,535,437 )
(74,770 )
Total other expense
(5,208,336 )
(379,883 )
Net loss before income taxes
(5,505,808 )
(710,003 )
Provision for Income Taxes
—
—
Net loss
(5,505,808 )
(710,003 )
Net income (loss) attributed to non-controlling interest
14,400
(52,236 )
Net loss attributed to Kaya Holdings, Inc.
(5,520,208 )
(657,767 )
Basic net loss per common share
$ (0.39 )
$ (0.05 )
Weighted average number of common shares outstanding - Basic
14,329,038
12,500,254
Diluted net loss per common share
$ (0.39 )
$ (0.05 )
Weighted average number of common shares outstanding - Diluted
14,329,038
12,500,254 2
(Unaudited)
(Unaudited)
For The Three
For The Three
Months Ended
Months Ended
March 31, 2021
March 31, 2020
OPERATING ACTIVITIES:
Net loss
$ (5,520,208 )
$ (657,767 )
Adjustments to reconcile net loss to net cash used in operating activities:
Net income/(loss) attributable to non-controlling interest
14,400
(52,236 )
Depreciation
30,262
55,675
Imputed interest
5,486
5,625
Loss (gain) on impairment of right-of-use asset
(31,671 )
—
Derivative expense
380,063
28,887
Change in derivative liabilities
4,535,437
74,770
Amortization of debt discount
142,977
138,776
Changes in operating assets and liabilities:
Prepaid expense
(1,539 )
2,393
Inventory
(14,362 )
27,777
Right-of-use asset
21,550
(218,850 )
Accrued interest
144,373
131,825
Accounts payable and accrued expenses
57,135
27,041
Accounts payable and accrued expenses - Related Parties
45,716
90,000
Right-of-use liabilities
(20,853 )
225,482
Net cash used in operating activities
(211,234 )
(120,602 )
INVESTING ACTIVITIES:
Investment in Subsidiaries
(6,142 )
—
Net cash used in investing activities
(6,142 )
—
FINANCING ACTIVITIES:
Proceeds from common stock subscriptions
35,000
12,500
Proceeds from convertible debt
210,000
90,000
Net cash provided by financing activities
245,000
102,500
NET INCREASE (DECREASE) IN CASH
27,624
(18,102 )
CASH BEGINNING BALANCE
43,162
86,967
CASH ENDING BALANCE
$ 70,786
$ 68,865
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid
—
—
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING
AND FINANCING ACTIVITIES:
Derivative liability on convertible note payable
210,000
90,000
Capitalization of interest pursuant to amended agreement
18,992
584,478
Shares issued for cash from stock payable
250
— 3
Additional
Paid-in Capital
Accumulated
Deficit
Noncontrolling
Interest
Total
Stockholders' Deficit
Post-Split
Subscription
Payable
Preferred
Stock
Common
Stock
Shares
Amount
Shares
Amount
Amount
Balance, December
31, 2019
100,000
$ 100
12,500,254
12,501
$ 163,630
$ 19,778,857
$
(32,120,787)
$ (1,325,781)
$ (13,491,480)
Imputed interest
-
-
-
-
-
22,500
-
-
22,500
Common stock issued for Cash
-
-
-
-
250
7,715
-
-
7,965
Common stock issued for services
-
-
546,667
547
-
263,445
-
-
263,992
Common stock issued for services - related parties
-
-
533,333
533
-
263,467
-
-
264,000
Common stock issued for debt conversion and
interest
-
-
683,753
684
-
101,879
-
-
102,563
Warrants granted for Cash
-
-
-
-
-
4,535
-
-
4,535
Reclassification of derivative liabilities
to additional paid in capital
-
-
-
-
-
197,058
-
-
197,058
Rounding Shares
-
-
402
-
-
-
-
-
-
Net loss
-
-
-
-
-
-
(12,098,821)
(198,401)
(12,297,222)
Balance, December
31, 2020
100,000
$ 100
14,264,409
$ 14,265
$ 163,880
$ 20,639,456
$
(44,219,608)
$ (1,524,182)
$ (24,926,089)
Balance, December
31, 2020
100,000
$ 100
14,264,409
$ 14,265
$ 163,880
$ 20,639,456
$
(44,219,608)
$ (1,524,182)
$ (24,926,089)
Imputed interest
-
-
-
-
-
5,486
-
-
5,486
Common stock issued for Cash
-
-
158,332
158
(250)
35,092
-
-
35,000
Net loss
-
-
-
-
-
-
(5,520,208)
14,400
(5,505,808)
Balance, March 31,
2021 (Unaudited)
100,000
$ 100
14,422,741
$ 14,423
$ 163,630
$ 20,680,034
$
(49,739,816)
$ (1,509,782)
$ (30,391,411) 4 5 6
•
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.
·
Alternative Fuels
Americas, Inc. (a Florida corporation)
·
34225 Kowitz Road,
LLC (an Oregon LLC)
7
·
Marijuana Holdings
Americas, Inc. (a Florida corporation)
o
MJAI Oregon 1 LLC
o
MJAI Oregon 2 LLC
(inactive)
o
MJAI Oregon 3 LLC
(inactive)
o
MJAI Oregon 4 LLC
(inactive)
o
MJAI Oregon 5 LLC 8
•
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.
Fair
Value Measurements at March 31, 2021
Level
1
Level
2
Level
3
Assets
Cash
$
70,786
$
-
$
-
Total
assets
70,786
-
-
Liabilities
Convertible
debentures, net of discounts of $561,953
-
-
6,924,786
Short
term debt, net of discounts of $-0-
-
-
-
Derivative
liability
-
-
22,454,404
Total
liabilities
-
-
29,379,190
$
70,786
$
-
$
29,379,190
Fair
Value Measurements at December 31, 2020
Level
1
Level
2
Level
3
Assets
Cash
$
43,162
$
-
$
-
Total
assets
43,162
-
-
Liabilities
Convertible
debentures, net of discounts of $494,930
-
-
6,762,817
Short
term debt, net of discounts of $-0-
-
-
-
Derivative
liability
-
-
17,328,904
Total
liabilities
-
-
24,091,721
$
43,162
$
-
$
(24,091,721)
9 10
•
•
•
•
11
•
•
•
•
12 13
March
31, 2021
December
31, 2020
(Unaudited)
(Audited)
ATM
Machine
$
5,600
$
5,600
Computer
18,990
18,990
Furniture
& Fixtures
43,466
43,466
HVAC
41,768
41,768
Land
697,420
697,420
Leasehold
Improvements
142,979
142,979
Machinery
and Equipment
312,331
312,331
Sign
12,758
12,758
Structural
1,017,359
1,017,359
Vehicle
79,744
79,744
Total
2,372,415
2,372,415
Less:
Accumulated Depreciation
(577,731)
(547,469)
Property,
Plant and Equipment - net
$
1,794,684
$
1,824,946
Rent
Deposits
$ 11,016
$ 11,016
Security
Deposits
5,491
5,491
Non-Current
Assets
$ 16,507
$ 16,507 14
Convertible
Debt Summary
Debt
Type
Debt
Classification
Interest
Rate
Due
Date
Ending
CT
LT
3/31/2021
12/31/2020
A
Convertible
X
10.0%
1-Jan-17
25,000
$ 25,000
B
Convertible
X
8.0%
1-Jan-24
82,391
82,391
C
Convertible
X
8.0%
1-Jan-24
41,195
41,195
D
Convertible
X
8.0%
1-Jan-24
262,156
262,156
O
Convertible
X
8.0%
1-Jan-24
136,902
136,902
P
Convertible
X
8.0%
1-Jan-24
66,173
66,173
Q
Convertible
X
8.0%
1-Jan-24
65,274
65,274
S
Convertible
X
8.0%
1-Jan-24
63,205
63,205
T
Convertible
X
8.0%
1-Jan-24
313,634
313,634
BB
Convertible
X
10.0%
1-Jan-20
50,000
50,000
CC
Convertible
X
10.0%
1-Jan-20
100,000
100,000
KK
Convertible
X
8.0%
1-Jan-24
188,000
188,000
LL
Convertible
X
8.0%
1-Jan-24
749,697
749,697
MM
Convertible
X
8.0%
1-Jan-24
124,690
124,690
NN
Convertible
X
8.0%
1-Jan-24
622,588
622,588
OO
Convertible
X
8.0%
1-Jan-24
620,908
620,908
PP
Convertible
X
8.0%
1-Jan-24
611,428
611,428
QQ
Convertible
X
8.0%
1-Jan-24
180,909
180,909
RR
Convertible
X
8.0%
1-Jan-24
586,804
586,804
SS
Convertible
X
8.0%
1-Jan-24
174,374
174,374
TT
Convertible
X
8.0%
1-Jan-24
345,633
345,633
UU
Convertible
X
8.0%
1-Jan-24
171,304
171,304
VV
Convertible
X
8.0%
1-Jan-24
121,727
113,322
XX
Convertible
X
8.0%
1-Jan-24
112,734
112,734
YY
Convertible
X
8.0%
1-Jan-24
173,039
173,039
ZZ
Convertible
X
8.0%
1-Jan-24
166,603
166,603
AAA
Convertible
X
8.0%
1-Jan-24
104,641
104,641
BBB
Convertible
X
8.0%
1-Jan-24
87,066
87,066
CCC
Convertible
X
8.0%
1-Jan-24
29,055
25,000
DDD
Convertible
X
8.0%
1-Jan-24
75,262
75,262
EEE
Convertible
X
8.0%
1-Jan-24
160,619
160,619
GGG
Convertible
X
8.0%
1-Jan-24
79,422
79,422
HHH
Convertible
X
8.0%
1-Jan-24
39,741
35,000
JJJ
Convertible
X
8.0%
1-Jan-24
52,455
52,455
LLL
Convertible
X
8.0%
1-Jan-24
77,992
77,992
MMM
Convertible
X
8.0%
1-Jan-24
51,348
51,348
PPP
Convertible
X
8.0%
1-Jan-24
95,979
95,979
RRR
Convertible
X
8.0%
1-Jan-24
16,177
15,000
SSS
Convertible
X
8.0%
1-Jan-24
75,000
75,000
TTT
Convertible
X
8.0%
1-Jan-24
80,000
80,000
UUU
Convertible
X
8.0%
1-Jan-24
20,614
20,000
VVV
Convertible
X
8.0%
1-Jan-24
75,000
75,000
WWW
Convertible
X
8.0%
1-Jan-24
60,000
-
XXX
Convertible
X
8.0%
1-Jan-24
100,000
-
YYY
Convertible
X
8.0%
1-Jan-24
50,000
-
Total
Convertible Debt
7,486,739
7,257,747
Less:
Discount
(561,953)
(494,930)
Convertible
Debt, Net of Discounts
$ 6,924,786
$ 6,762,817
Convertible
Debt, Net of Discounts, Current
$ 175,000
$ 363,243
Convertible
Debt, Net of Discounts, Long-term
$ 6,749,786
$ 6,399,574
Principal
balance
$ 25,000
Accrued
interest
29,326
Balance
maturing for the period ending:
March
31, 2021
$ 54,326 15 16 17 18 19 20 21 22 23
December
31, 2020
Note
5
9,312
9,312
Total
Non-Convertible Debt
9,312
9,312
B-Related
Party
Loan
payable - Stockholder, 0%, Due December 31, 2021 (1)
$ 250,000
$ 250,000
$ 250,000
$ 250,000
| (1) | The $250,000 non-convertible note was issued as part of a Debt Modification Agreement dated January 2, 2014. On January 1, 2019, the holder of the note extended the due date until December 31, 2021. The interest rate of the non-convertible note is 0%. The Company used the stated rate of 9% as imputed interest rate, which was $5,486 and $5,625 for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the balance of the debt was $250,000 |
NOTE
8 – STOCKHOLDERS’ EQUITY The
Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001, of which 100,000 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 434 votes on any matters submitted to a vote of the stockholders of the Company and is entitled to dividends
equal to the dividends of 434 shares of common stock. Each share of Series C preferred stock is convertible at any time at the
option of the holder into 434 shares of common stock. The
Company has 500,000,000 shares of common stock authorized with a par value of $0.001. 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
February 13, 2020, the Company sold a 0.25 subscription unit for $12,500. Each unit consists of 66,667 post-reverse split shares
of the Company's common stock; 66,667 one-year class A warrants at an exercise price of $0.12 per Company's post-reverse split
share; 66,667 two-year class B warrants at an exercise price of $0.18 per Company's post-reverse split share; and 1,000,000 shares
of common stock of Kaya Brands International, Inc, which is a majority-owned subsidiary of the Company. As of December 31, 2020,
the shares had not been issued. On
July 13, 2020, a total of 533,333 shares of common stock of Kaya Holding Inc. were issued for services performed; 266,667 shares
were issued to a non-management consultant and related parties and 266,666 shares were issued to a related party The shares were
valued at $264,000. Total of 480,000 shares of common stock has been issued for service performed by employees. The shares were
valued at $237,600. On
July 20, 2020, total of 683,753 shares of common stock of Kaya Holdings Inc. were issued in satisfaction of 5 promissory notes.
The total principal and interest converted were $102,563. There was no gain or loss on conversion as the conversion was done per
terms of the note agreement. On
October 7, 2020, a total of 66,667 shares of common stock of Kaya Holding Inc. were issued for services performed. The shares
were valued at fair value of $26,392 The
above issuances reflected a 15 to 1 reverse stock split, which resulted in a total of 14,264,409 outstanding as of December 31,
2020 and 402 rounding shares issued in 2020. On
January 22, 2021, the Company sold and issued 50,000 shares of common stock for gross proceeds of $15,000. On
March 8, 2021, the Company sold 66,666 shares of common stock for gross proceeds of $20,000 and issued on March 11,2021. On
March 5, 2021, total of 41,666 shares of common stock had been issued from stock payable for stock subscripted in 2020. NOTE
9 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 from 0.05% to 2.63%, volatility ranging from 84.63% to 243.22%, trading prices ranging from
$0.42 per share to $6.15 per share and a conversion price ranging from $0.15 per post-reverse split share to $0.38 per share. As
a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is
summarized as follow: 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. The
Company recoded initial derivative liabilities of $590,063 and $90,000 for the new notes issued for three month ended March 31,
2021 and 2020, respectively. The
Company recorded derivative liability expense of $380,063 and $28,887 for the three month ended March 31, 2021 and 2020, respectively. The
Company recorded a change in the value of embedded derivative liabilities expense of $4,535,437 and $74,770 for the three months
ended March 31, 2021 and 2020, respectively. NOTE
10 – 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 $561,953 and $422,909 as of March 31, 2021 and 2020, respectively. The
Company recorded the amortization of debt discount of $142,977 and $138,776 for the three months ended March 31, 2021 and 2020,
respectively. NOTE
11 – RELATED PARTY TRANSACTIONS At
December 31, 2014, the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100
principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014, the Company entered into a Debt Modification
Agreement whereby the total amount of the debt was reduced to $750,000 and no interest accrued until December 31, 2015. $500,000
of the debt is convertible into 50,000 Series C Convertible Preferred Shares of KAYS. The remaining $250,000 is not convertible. On
December 31, 2015, the Company entered into an agreement to extend the debt until December 31, 2017 with no additional interest
for the extension period. On January 1, 2018 the Company entered into an agreement to further extend the debt until December 31,
2021 with no additional interest for the extension period. At
December 2017, the company was indebted to Craig Frank, Chairman, CEO and Acting CFO for KAYS, in the amount of $7,737 for travel
and miscellaneous expenses incurred by Mr. Frank from travel and related activities in Oregon. In
each of 2018 and 2019, the Company issued stock grants to Jordi Arimany and Carrie Schwarz for 100,000 shares of KAYS stock for
their service as board members. The stock was issued from Treasury as restricted stock and carries a one-year restriction before
it can be registered for resale pursuant to Rule 144. In
2018 and 2019, the Company issued stock grants to Craig Frank for 3,000,00 shares of KAYS stock each year, pursuant to his employment
agreement via board resolution. Jordi Arimany and Carrie Schwarz for 100,000 shares of KAYS stock. The stock was issued from Treasury
as restricted stock and carries a one year restriction before it can be registered for resale pursuant to Rule 144. In
August, 2018 KAYS entered into an agreement with Bruce Burwick, (who subsequently joined the Board of Directors and became an
affiliate of the Company) to purchase the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed
by the OLCC for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles.
The purchase includes a 12,000 square foot building housing an indoor grow facility, as well as equipment for growing and extraction
activity. KAYS paid Bruce Burwick $1,300,000.00 for the real property and schedule of equipment that was and is used to operate
the facility. Bruce
Burwick acquired the property for satisfaction of a promissory note due him for $1,433,000.00. The purchase price of $1.3 million
for the OLCC licensed marijuana production and processing facility, consisting of the building and equipment was paid for by the
issuance of 12 million shares of KAYS restricted stock to the seller at closing. The shares carry a lock-up-restriction that allows
for their staged eligibility for resale over a 61-month period from the date of the purchase of the facility by KAYS. Additionally,
the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with the Company. The proceeds
from the sale of those shares were and are being used for acquisition related expenses, transitional operating costs and facility
capital improvements with respect to the production and processing facility we purchased. On
October 14, 2019 the shareholder submitted a conversion notice and the $500,000 in convertible debt was converted into 50,000
Series C Preferred shares of KAYS stock. The stock was issued from Treasury as restricted stock and carries a minimum of one year
restriction before it can be registered for resale pursuant to Rule 144. In
2019, the Company issued a stock grant to Bruce Burwick for 100,000 shares of KAYS stock for his service as a board member. The
stock was issued from Treasury as restricted stock and carries a one-year restriction before it can be registered for resale pursuant
to Rule 144. 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 a monthly compensation of $25,000. Due to the liquidity of the Company,
the compensations were paid partially over the periods. As of March 31, 2021, the accrued compensation was approximately $885,405,
whereas, $820,405 was carried over from prior years. As of March 31,2021, the Company also had $18,247 of accounts payable
due to Tudog International Consulting, Inc. and BMN Consultants, Inc. NOTE
12 – STOCK OPTION PLAN In
2011 the Alternative Fuels America, Inc. 2011 Incentive Stock Plan (the “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 2011 Incentive Stock Plan, restricted stock awards, other stock based awards, or any combination of the foregoing.
The 2011 Incentive Stock Plan is administered by the board of directors. On
July 22, 2020, the Board of Directors approved the issuance of 666,667 shares of stock to recipients of the plan (the shares are
to be issued after the 2020 June 30 Quarterly filing is completed). Upon issuance the remaining balance of the shares available
in the plan will be 60,333 shares. NOTE
13 – WARRANTS On
September 8, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the
aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the
company 210,772 paid and non-assessable post -reverse split shares of the Common Stock at the price of $0.4744455 per post-reverse
split share (the “Warrant Exercise Price”) for a period of five (5) years commencing from the earlier of such time
as that certain $100,000, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period
as defined in “The Note” or September 9, 2017. As of December 31, 2019, the note was paid in full. On
September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the
aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the
company 210,772 paid and non-assessable post-reverse split shares of the Common Stock at the price of $0.4744455 per post-reverse
split share (the “Warrant Exercise Price”) for a period of five (5) years commencing from the earlier of such time
as that certain $100,000, 10% promissory note due September 9, 2017 has been fully repaid or the start of the Acceleration Period
as defined in “The Note” or September 9, 2017. As of December 31, 2019, the note was paid in full. On
May 9, 2016 the Company received a total of $75,000 from an accredited investor in exchange for a two year note in the aggregate
amount of $75,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 158,079
paid and non-assessable post-reverse split shares of the Common Stock at the price of $0.4744455 per post-reverse split share
(the “Warrant Exercise Price”) for a period of five (5) years commencing from the earlier of such time as that certain
$75,000, 10% promissory note due May 9, 2018 has been fully repaid or the start of the Acceleration Period as defined in “The
Note” or May 9, 2018. As of December 31, 2019, the note was paid in full. On
May 17, 2016 the Company received a total of $75,000 from an accredited investor in exchange for a two year note in the aggregate
amount of $75,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 158,079
paid and non-assessable shares of the Common Stock at the price of $0.4744455 per share (the “Warrant Exercise Price”)
for a period of five (5) years commencing from the earlier of such time as that certain $75,000, 10% promissory note due May 17,
2018 has been fully repaid or the start of the Acceleration Period as defined in “The Note” or May 17, 2018. As of
December 31, 2019, the note was paid in full. Warrants
issued to Non-Employees NOTE
14 – COMMITMENTS AND CONTINGENCIES Operating
Leases The
Company has several operating leases for an office and store lease in Fort Lauderdale, Florida and several locations in Oregon
under arrangements classified as leases under ASC 842. Effective
June 12, 2017, the Company leased the office space in Fort Lauderdale, Florida under a 5-year operating lease expiring June 30,
2022. The lease provides for increases in future minimum annual rental payments based on defined annual increase beginning with
monthly payments of $4,017 and culminating in a monthly payment of $4,839. The total amount of rental payments due over the lease
term is being charged to rent expense according to the straight-line method over the term of the lease. The lease was terminated
on July 3, 2019 and the Company agreed to issue landlord 500,000 shares of common stock as penalty for early termination. Effective
June 1, 2019, the Company leased the office space in Fort Lauderdale, Florida under a 2-year operating lease expiring May 31,
2021. The rental payment is $1,802 per month. The total amount of rental payments due over the lease term is being charged to
rent expense according to the straight-line method over the term of the lease. Effective
May 15, 2014, the Company leased an unit in Portland, Oregon under a 5-year operating lease expiring May 15, 2019. In May 2019,
the lease had been extended to May 15, 2024. The lease provides for increases in future minimum annual rental payments based on
defined annual increase beginning with monthly payments of $2,250 and culminating in a monthly payment of $2,632. The total amount
of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term
of the lease. The lease is now on a month-to-month basis. Effective
June 1, 2015, the Company leased an unit in Salem, Oregon under a 5-year operating lease expiring May 31, 2020. The lease provides
for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments of $3,584
and culminating in a monthly payment of $4,034. The total amount of rental payments due over the lease term is being charged to
rent expense according to the straight-line method over the term of the lease. The lease is now on a month-to-month basis. Effective
April 15, 2016, the Company leased an unit in Salem, Oregon under a 5-year operating lease expiring April 15, 2021. The lease
provides for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments
of $4,367 and culminating in a monthly payment of $4,915. The total amount of rental payments due over the lease term is being
charged to rent expense according to the straight-line method over the term of the lease. The lease is now on a month-to-month
basis. Effective
April 15, 2016, the Company leased an unit in Salem, Oregon under a 5-year operating lease expiring April 15, 2021. The lease
provides for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments
of $4,617 and culminating in a monthly payment of $5,196. The total amount of rental payments due over the lease term is being
charged to rent expense according to the straight-line method over the term of the lease. The lease is now on a month-to-month
basis. The
Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is
readily determinable. The Company used an estimated incremental borrowing rate of 9.32% to estimate the present value of the right
of use liability. The
Company has right-of-use assets of $301,210 and operating lease liabilities of $370,661 as of March 31, 2021. Operating lease
expense for the three months ended March 31, 2021 and 2020 were $62,677 and $49,428, respectively. Due to the closure of 2 stores,
the Company evaluated long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Hence, the Company have recorded $87,151 in impairment charges related to right-of-use
assets during the years ended December 31, 2020. Note
15- 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. Management evaluated the activity of the Corporation
through the date the financial statements were issued, and concluded that no subsequent events have occurred that would require
recognition in the financial statements or disclosure in the notes to the financial statements.
Item 2. Management’s
Discussion and Analysis of Financial Condition and Results of Operations. Business Overview PART
I Item
1. Business. Kaya
Holdings, Inc., “KAYS” or the “Company” a Delaware corporation, is a vertically integrated legal marijuana
enterprise that produces, distributes, and/or sells a full range of premium cannabis products including flower, oils, vape cartridges
and cannabis infused confections, baked goods and beverages through a fully integrated group of subsidiaries and companies supporting
highly distinctive brands. KAYS
is a veteran of the global legal cannabis industry, with more than six years of operational experience. KAYS is the first U.S.
publicly traded company to operate a legal marijuana dispensary, as well as the first to vertically integrate by adding cultivation
and manufacturing. The
Company’s business strategy seeks to achieve four fundamentals objectives: Kaya
Holdings currently operates three majority-owned subsidiaries, each responding to various demands and opportunities in the cannabis
industry, to aid in the execution of these objectives: Marijuana
Holdings Americas, Inc. Marijuana
Holdings Americas, Inc. (“MJAI”), incorporated in 2014, operates the Company’s U.S. based cannabis operations
including its Kaya Shack™ retail brand and the Kaya Farms™ cultivation brand. After
an evaluation of several factors including reputation for cannabis excellence, costs of entry, learning opportunity, and ease
of regulatory structure, the Company selected Oregon as its point-of-entry into the legal cannabis sector where it commenced operations
in Oregon in July 2014. Oregon is universally recognized for its excellence in cannabis cultivation and is part of the famed “Green
Triangle” of expert cannabis cultivation that also includes Northern California. Having Oregon as the Company’s learning
ground has allowed the Company to combine “traditional” methods of cannabis cultivation with modern agriculture techniques. The
Company’s US operations are currently focused in Oregon, where all of the Company’s operations are licensed by the
Oregon Liquor Control Commission (the “OLCC’), which has jurisdiction over legal medical and recreational cannabis
grow, production and retail operations. The Company has three active OLCC Marijuana Retailer Licenses, each of which allow for
one brick-and-mortar physical dispensary location as well as unlimited delivery operations tied to the geographic location of
the fixed based licensed operations. KAYS currently operates two Kaya Shack™ retail outlets (one in South Salem and one
in Portland), and is in the process of targeting its third license to operate a Kaya Farm Store and Delivery Hub to service the
Southern Oregon Market. The
Company has developed its own proprietary Kaya Farms™ strains of cannabis, which it has grown and produced at the various
medical and recreational grows that the Company has operated and maintained over the past seven years in Oregon. The
Company is currently applying for a new Cannabis Processing License for its 12,000 square foot Cannabis Processing and Cannaceutical
Facility in Eugene, Oregon which KAYS acquired in October 2018. Additionally,
the Company also owns a 26-acre parcel in Lebanon, Linn County, Oregon, which it purchased in August 2017 on which it intends
to construct a cannabis cultivation complex, which will initially consist of an 85,000-square foot Kaya Farms™ Greenhouse
Grow and Production Facility. The Company has received county zoning approvals for the complex, and has recently been notified
by the OLCC that they are ready to proceed with KAYS Production (Grow) Licensing for the Linn County Facility pending completion
of initial construction. Kaya
Brands USA Kaya
Brands USA, Inc. (“KBUS”) was recently incorporated to manage and leverage the intellectual property associated with
the Kaya family of brands and seek out US based projects and ventures to enhance shareholder value associated with their development. KBUS
presently manages 18 proprietary brands formulated and developed by the Company which includes the Kaya Shack™ retail brand,
the Kaya Farms™ cultivation brand, and the Kaya Gear™ apparel brand, as well as a host of carefully developed cannabis
and CBD products that include cannabis extracts and concentrates, vape cartridges, chocolates, gummies and chews, topicals and
creams, beverages, foods, and cannaceuticals. Kaya
Brands International and International Plans for Expansion Kaya
has recently implemented a strategic shift away from the U.S. cannabis market, its initial intended focus, placing current expansion
emphasis on international opportunities and brand extensions. While the US Cannabis markets are receiving a strong tail wind from
the recent change in administration and the fact that US Cannabis Banking and Taxation Laws and Regulations are forecast to become
more industry friendly, KAYS believes that it will still be some years until such time that the Federal Laws allow for Interstate
Cannabis Commerce and true economies of scale to develop within the emerging U.S. Cannabis Markets. Thus, KAYS has developed an
exciting international growth program with the potential for strategic position and growth, all the while remaining prepared for
the eventuality of a more inviting U.S. market. Kaya
Brands International, Inc. (“KBI”) was incorporated in late 2019 to serve as the Company’s vehicle for expansion
into worldwide cannabis markets. KBI is seeking to leverage the other product brands for development of the Kaya Shack™
retail and Kaya Farms™ brands in Europe and elsewhere as opportunities permit. Projects currently under development include
licensing of the Kaya Shack™ retail brand for franchising in Canada and licensing of the Kaya Farms™ brand to develop
cultivation projects in Greece, Israel and other potential locations. This
segregation of US and foreign based activities would allow for KAYS to eventually have KBI listed on a recognized securities exchange
such as the OTCQX, NASDAQ or NYSE in the US, the Canadian Securities Exchange or “CSE” in Canada (a Canadian Exchange
that has proven to be an excellent source of new institutional and retail investment capital and liquidity for both Canadian and
U.S.-based OTC cannabis stocks) or other such international exchange that would allow KBI to access additional capital not currently
available through US over-the counter (“OTC”) markets. KAYS
intends to maintain a majority ownership of KBI, but is also working on plans to issue a dividend of common shares in KBI to shareholders
of record at a date to be determined by the Board of Directors of KAYS. Additionally,
KAYS intends to structure KBI’s participation in projects that would lead to these projects eventually seeking their own
public company status and corresponding issuance of securities which could potentially significantly enhance the value of KAYS/KBI’s
investment and possibly lead to dividends for KAYS/KBI’s shareholders. There can be no assurance given as to whether or
when KAYS will be able to do so, or it would ultimately be successful in increasing shareholder value. Corporate
Information Our
corporate office is located at 915 Middle River Drive, Suite 316, Fort Lauderdale, Florida, 33304. Our telephone number is 954-892-6911
and our corporate website is www.kayaholdings.com. Information contained on our corporate website does not constitute part of
this Memorandum. The
Global Cannabis Industry New
Frontier Data estimates the existing global demand for cannabis to be $344.4 billion USD, using consumption levels and market
prices to reach their estimate. The illicit market, with the exception of the relatively few countries that regulate and license
cultivation or importation of cannabis, meets the vast majority of global demand for cannabis. There
are an estimated 263 million people globally who can be classified as cannabis consumers, demonstrating significant demand for
the medical, wellness, and recreational uses of cannabis. The strength of demand varies by region and depends heavily on the status
of legalization, levels of social acceptance, and access to cannabis. There are an estimated 1.2 billion people worldwide suffering
from medical conditions for which cannabis has shown therapeutic value. There
are currently 55 countries with legalized cannabis for medical use. The regulatory framework varies by country and may differ
in rules for qualifying conditions, physician participation, production and processing, accepted delivery systems, insurance payment
participation, and potency permitted. The stringency of the rules typically has a significant impact on the size, growth, and
reach of each program. Canada
and Uruguay are the first two nations with legal recreational cannabis, with a few other nations set to follow, including South
Africa, Georgia and Mexico. The aim of the legal programs is to transition the illicit market to the legal, regulated and taxable
markets. Canadian companies were the first to create global cannabis infrastructure and are poised to compete with
other emerging export centers, including Israel, Greece and Colombia. The
United States has been the global leader in cannabis innovation, including new genetics, cultivation techniques, derivative products,
and delivery methods. U.S. based companies are beginning to move into the global arena. The
opportunity represented by legal cannabis is significant, but many countries limit the number of legal participants and have regulatory
policies that are still evolving, leading to high overall risk and barriers to entry. As
governments in newly legalized markets lay the foundations for their nascent industries, many lack or do not wish to regulate
domestic cultivation and production activity. This forms the foundation for a vibrant international cannabis import-export sector. North
America North
America, according to New Frontier Data, represents a total cannabis demand (legal & illicit) valued at $86 billion USD. The
United States and Canada have been leading the global legal cannabis movement, which in turn impacts the way governments worldwide
are structuring the regulation of legal cannabis in their own countries. Canada Canada
is the first G-7 nation to fully legalize cannabis for medical and recreational use. The legal structure has given rise to large
Canadian cannabis companies that have achieved high valuations, which they have leveraged to purchase supply chain companies and
invest in infrastructure projects to produce cannabis at costs lower than those in Canada. To
date, Canadian companies report exporting only several thousands of pounds of cannabis to more than 20 different countries, collectively
– demonstrating the early stage of development of the global cannabis market, and by extension the remaining opportunities. The
United States New
Frontier Data forecasts that the legal U.S. markets will generate nearly $19 billion in legal sales in 2020, growing to over $20
billion by 2022. Cannabis
remains federally illegal in the United States, even as support for legal recreational cannabis remains above 60% in most reputable
polls. Regardless of the federal status of cannabis, currently 33 U.S. states have enacted laws legalizing some form of medical
cannabis, and 10 states and the District of Colombia have legalized recreational use cannabis. The United States has been the
global leader in cannabis innovation, including new genetics, cultivation techniques, derivative products, and delivery methods. States
with some type of legal medical cannabis laws include Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii,
Illinois, Georgia, Indiana, Iowa, New Hampshire, Louisiana, Rhode Island, Minnesota, Missouri, Maryland, Montana, Michigan, New
Mexico, New York, North Dakota, New Jersey, Ohio, Oklahoma, Vermont, Pennsylvania, Rhode Island, Texas, Utah, and West Virginia.
States permitted the sales of recreational or “adult-use” cannabis are Alaska, California, Colorado, Illinois, Maine,
Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington. The District of Colombia (Washington D.C.) also permits adult-use
cannabis. Europe New
Frontier Data estimates the European cannabis market (legal & illicit) generates $69 billion USD annually, with France, Italy
and Spain having the greatest number of cannabis consumers, and Germany with the most robust medical program to date. With
the U.S. political shift creating federal U.S. legalization optimism, the U.S. marijuana market is projected to grow to $30-$37
billion by 2024. On the other hand, with over twice the population of the U.S. and Canada combined, Europe’s cannabis
market is projected to reach $146.37 billion by 2028. There
are almost 30 European countries that permit some form of legal medical cannabis including, France, Italy, Germany, United Kingdom,
Spain, Poland, Czech Republic, Croatia, Cyprus, Denmark, Finland, Greece, Israel, Luxembourg, North Macedonia, Malta, Netherlands,
Norway, Poland, Romania, Switzerland, Turkey, Ireland, Lithuania and Portugal. The European Union requires its member countries
to enforce the European Union Good Manufacturing Practices (GMP), which detail the production standards for medicinal products.
These standards are typically stringent and can be costly for cannabis companies. Israel
and Greece Israel
has a small population but a long established history of legal medical cannabis development. It continues as a leader with years
in the development of cannabis pharmaceuticals, and together with Greece the 2 are projected to form a “Silicon Valley”
network for the development of medical cannabis production to service the European Markets and beyond. The
Kaya™ Family of Brands Kaya
Holdings, Inc., “KAYS” or the “Company” a Delaware corporation, is a vertically integrated legal marijuana
enterprise that produces, distributes, and/or sells a full range of premium cannabis products including flower, oils, vape cartridges
and cannabis infused confections, baked goods and beverages through a fully integrated group of subsidiaries and companies supporting
highly distinctive brands. Currently
Operational Brands (2014-2020) Next
Stage Traditional (2020-2022) Next
Stage Innovative (2020-2022) Note:
The “Next Stage Traditional” and “Next Stage Innovative” brands are all targeted for release over the
6-18 months. The Company is currently awaiting the culmination of both the new licensing process and buildout of the Kaya Farms
Processing & Cannaceutical Production Facility in Eugene, Oregon, and the pending license issuance of the Kaya Farms Ag Facility
in Lebanon, Oregon to finalize the release dates for these brands in Oregon. In the event that the licensing approval and construction
timeline of these facilities is delayed or experiences difficulties, the Company has sourced other alternatives to expedite the
release of the brands and will update shareholders accordingly as to revised brand rollout dates (if any). The
Kaya Shack™ Brand Kaya
Holdings operates the Kaya Shack™ brand of legal medical and recreational retail marijuana retail stores. Kaya Holdings
operates two recreational marijuana retail outlets and medical marijuana dispensaries in Oregon under the Kaya Shack™ brand. Additionally,
Kaya Holdings maintains an active third OLCC Marijuana Retail License which it is seeking to move to its Eugene, Oregon Kaya Farms
Indoor Production and Processing Facility so that the Company may offer a “Kaya Farm Store” and also serve as a retail
delivery hub for Eugene, Oregon. Dubbed
by the mainstream press as the “Starbucks of Marijuana” after our first outlet opened in July 2014, our operating
concept is simple: to deliver a consistent customer experience (quality products, fair prices and superior customer service) to
a broad and diverse base of customers. Kaya Shack™ meets the quality needs of the “marijuana enthusiast”, the
comfort and atmosphere of all including “soccer moms” and the price sensitivities of casual smokers. The
Kaya Shack™ brand communicates positive thinking and joy, with signs adorning the walls that read “It’s a Good
Day to have a Good Day,” “Some of our Happiest Days Haven’t Even Happened Yet,” and our signature “Be
Kind.” Kaya
Shack™ retail outlets are open 7 days a week- Monday through Saturday from 8:00 am to 10:00 pm, and Sunday 8:00 AM to 9:00
PM. Operations follow an operational manual that details procedures for 18 areas of operation including safety, compliance, store
opening, store closing, merchandising, handling of cash, inventory control, product intake, store appearance and employee conduct. In
compliance with regulations, all marijuana and marijuana infused products sold through our stores are quality tested by independent
labs to assure adherence to strict quality and OLCC regulations. The
Company is exploring opportunities to expand its operations beyond Oregon by replicating its Kaya Shack™ brand retail outlets
through franchising in other states where medial and or recreational cannabis use is legal or expected to become legal in the
near term, as well as in Canada, Greece and Israel, as part of KAYS International Expansion Plans. KAYS also is targeting opening
corporate owned marijuana production and processing facilities to support the envisioned franchised outlets, and to both maintain
quality control and offer customers a consistent customer experience while reducing costs of goods to franchisees. Kaya
Shack™ Retail Outlets All
stores feature a check out stand wrapped to feature the Company’s proprietary brand of pre-rolls, Kaya Buddies. The Buddies
program is an exciting and popular pre-roll offering, featuring a wide selection (15-15 strains of pre-rolls) and featuring our
special Kaya Saying in each Buddies tube. A glass display case showcases at least 25 strains of marijuana flower, which the stores
serve to customers “deli style”, weighing straight from the jar to the customer’s take-out tube. An additional
display case with a varied selection of oils, concentrates and topicals rounds out the cannabis product display. The
stores also feature standing display cases with cannabis intended glassware under the Company’s brand Really Happy Glass,
as well as a rack of proprietary t-shirt designs marketed under the Company brand Kaya Gear. The store also has a hospitality
area that offers free water, coffee, tea and hot cocoa. As required by law, all products containing marijuana are either behind
locked glass or behind the counter and out of customer reach. I.
Kaya Shack™ , 1719 SE Hawthorne Blvd., Portland, Oregon.
Our
first Kaya Shack™ OLCC licensed marijuana store (located in the heart of the trendy Hawthorne district in southeast Portland,
the “Greenwich Village” of the West Coast) opened for business July 03, 2014. The store is located next door to a
cell phone repair shop, and near to Devil’s Dill restaurant and No Fun pub. There are also a McMenamins restaurant, tattoo
parlor, convenience store, hair/nail salon and a soccer sports bar. The area around the shop is mixed use (commercial and residential)
and has a footprint of approximately 700 square feet and is the model for the Company’s small urban shops.
II. Kaya Shack ™ Marijuana Superstore, South Salem, Oregon.
Our
second Kaya Shack™ OLCC licensed marijuana store (located in South Salem, Oregon) opened for business on October 17, 2015.
The store is located in a strip mall alongside a Caesar’s Pizza, Aaron’s furniture, a convenience store, a tanning
salon, and a nail salon. The plaza also has a Subway, a sports bar and a laundromat. The area around the shop is primarily commercial
with residential complexes under construction and has a footprint of approximately 2,100 square feet and serves as the model for
the Company’s superstores featuring larger display areas and a soon-to-be-opened Pakalolo Juice Company infused fresh fruit
smoothies stand. Kaya
Shack™ Car Fleet and Home Delivery The
Company is licensed by the OLCC for home delivery for all three of its retail licenses and has a fleet of 4 Kaya Cars featuring
the Company’s branding logos outfitted with safes and security equipment. We have begun to offer deliver within the geographic
areas of Portland and Salem, and are looking to expand this offering to Eugene if we are able to get an approval on the transfer
of our third retailer license and open up the Kaya Farm Store at our Eugene, Oregon Kaya Farms Indoor Grow, Processing & Cannaceutical
Production Facility. The
Company has developed the website www.kayadelivers.com to advance the growth of its delivery service and to offer pre-ordering
for curbside pickup in light of the coronavirus pandemic to better serve our customers. We
expect delivery to extend our visibility, assist in building brand awareness, and allow the Company to service a broader geographic
territory. 24
Balance
as of December 31, 2020
$ 17,328,904
Initial
590,063
Change
in Derivative Values
4,535,437
Conversion
of debt-reclass to APIC
(0 )
Balance
as of March 31, 2021
$ 22,454,404 25 26
Warrants
Issued
Weighted
Average Exercise Price
Weighted
Average Contract Terms Years
Balance
as of December 31, 2020
316,158
0.47
0.36
Granted
-
-
-
Exercised
-
-
-
Expired
-
-
-
Balance
as of March 31, 2021
316,158
0.47
0.12
Maturity
of Lease Liabilities at March 31, 2021
Amount
2021
120,207
2022
111,435
2023
99,203
Later
years
103,658
Total
lease payments
434,503
Less:
Imputed interest
(63,842
)
Present
value of lease liabilities
$
370,661
27
Overview
· maintaining
direct access to customers (to own the relationship with end-users);
· effecting
vertical integration to control the supply chain (to control cost, selection and quality);
· introducing
strong brands in tradition and innovative categories (to control asset development);
and
· creating
the capacity to expand nationally and internationally as regulations and opportunities
permit. 29 30 31 32 
33 
34 
35 
36 
37 
38 
39 
40 
41
Kaya Farms™
The Company has developed its own proprietary Kaya Farms™ strains of cannabis, which it has grown and produced at the various medical and recreational grows that the Company has operated and maintained over the past seven years in Oregon. Additionally, KAYS has produced a full line of cannabis concentrates and extracts which it has initially produced through third party manufacturers and marketed at the Kaya Shack Stores, along with the very popular Kaya Buddies line of strain specific cannabis cigarettes.
Please see the following pages for an overview of our current properties in Oregon which details their history, current status and intended development, as well as pictures of our crops and testing results for some of the cannabis and cannabis products in our strain library.
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Kaya Farms™
Lebanon, Linn County, Oregon Marijuana Grow and Manufacturing Complex
In early 2015, KAYS commenced its own medical marijuana grow operations for the cultivation and harvesting of legal marijuana thereby becoming the first publicly traded U.S. company to own a majority interest in a vertically integrated legal marijuana enterprise in the United States. Since that time KAYS has operated various grow facilities to feed the Kaya Shack Supply Chain, and in August 2017, KAYS acquired its first property for a large scale facility- a 26-acre parcel in Lebanon, Linn County, Oregon, where we intend to develop an 85,000-square foot Kaya Farms™ facility.
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We filed for zoning and land use approval in early 2018, and after numerous regulatory challenges and delays, we finally received zoning and land use approval in early 2019 to build on the property. We are presently in the final planning stages and are awaiting the culmination of the OLCC licensing process to begin construction.
Management believes that the acquisition and development of the property will position the Company for future growth and expansion, including increased Marijuana Canopy production to the maximum extent allowed by law through use of both greenhouse and outdoor grows.
Under present laws the property can easily deliver 6-8,000 pounds of cannabis each year; if future regulations permit this capacity could easily be increased to over 100,000 pounds of cannabis per year.
When Federal Prohibition of marijuana ends and national and international cannabis trade can begin, we believe that Oregon is uniquely positioned to become America’s “pot basket” due to its superior climate and state history involving generations of Oregonian Cannabis Growers; ideal weather + extensive generational knowledge = superior, lower cost cannabis products for export.
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Kaya Farms Indoor Marijuana Grow, Processing & Cannaceutical Production Facility
On October 23, 2018 KAYS announced that it had concluded the purchase of the real property and associated equipment utilized by the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the OLCC for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. The purchase included a 12,000 square foot building housing equipment for growing and extraction activity.
The purchase price of $1.3 was paid for by the issuance of 12 million shares of KAYS restricted stock to the seller at closing. Additionally, the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with the Company, and became a Board Member of Kaya Holdings. While the shares carried a lock-up-restriction allowing for their staged eligibility for resale over a 61-month period from the date of the purchase of the facility by KAYS, none of the shares have been submitted for resale.
As the OLCC deemed that the licenses that were part and parcel of the purchase were ultimately non-transferrable to KAYS by Sunstone, the Company recently negotiated a settlement with the seller that allows KAYA to retain ownership of the facility, for the return of all shares issued to the seller as part of the transaction (the 12 million shares for the facility purchase, the 2.5 million shares issued for $250,000.00, and subsequent shares issued as annual compensation for Board Member Compensation) in exchange for allowing the seller to retain the proceeds of the sale of the grow license to an unrelated third party that is in process of obtaining approvals from the OLCC to relocate it to another location, as well as provides for the seller to resign from the Board of Kaya Holdings and work as a non-exclusive consultant to the Company for the next 48 months for a total four year fee of $140,000.
As part of a larger production and processing plan that would allow for a more efficient Production and Processing plan and economy of scale, the Company is presently in the process of submitting a new OLCC Marijuana Processing License for the 12,000 facility, and plans to renovate and dedicate the facility to produce various brands of oils, edibles, concentrates and extracts, and develop medical grade laboratory facilities for the production of a proprietary Kaya Cannaceuticals™, while conductingall future grow operations at the Lebanon Kaya Farms Ag Facility upon completion of construction and licensing.
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| 46 |
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Kaya Buddie™ Strain Specific Cannabis Cigarettes
In 2016 the Company introduced a signature line of strain-specific connoisseur-grade, pre-rolled cannabis cigarettes branded as “Kaya Buddies™”. Kaya Buddies™ cannabis cigarettes have been very well received by medical patients and recreational users, with the Company selling over 100,000 Kaya Buddies™ since launching the brand in January 2016. The brand, marketed under the tagline “Buds with Benefits”, features over 50 different strains of connoisseur-grade, high quality cannabis and proprietary specialty blends. Many cannabis retailers produce prerolls, but none that we know of offer strain specific preroll made from the buds of the flower.
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Kaya Brands International
After over five years of conducting “touch the plant” U.S. cannabis operations inside the strict regulatory confines of a public company, KAYS has formed Kaya Brands International, Inc. (“Kaya International” or “KBI”), to leverage its experience and expand into worldwide cannabis markets. KBI’s current operations and initiatives include Canada Greece, and Israel, with additional areas under consideration for Mexico, Uruguay and Zimbabwe.
Canada
Canadian Franchising: KAYS has endeavored to launch its franchise program and growth strategy in Canada. To this end, the Company has retained the Toronto based law firm of Garfinkle Biderman LLP to prepare the legal infrastructure required to enable the Company to sell Kaya Shack™ franchises in Canada.
Garfinkle Biderman has since completed the necessary legal work and the Company is currently in negotiations with different potential development partners to launch franchised operations in Canada and hopes to establish up to 100 franchised locations there over the next five years.
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Greece
Kaya Kannabis is a joint venture project cultivation-for-export cannabis-farming project of Athens based Greekkannabis PC (“GKC”) and KBI. GKC is a recently formed Athens, Greece based cannabis company with deep ties in the Greek business community and a strong presence in the academic and agricultural communities. The alliance is designed to combine the business acumen and extensive European network of GKC with the broad cannabis industry and cannabis cultivation experience of Kaya Holdings.
Kaya Kannabis Medical Cannabis Production Facility in Thebes, Greece (Project Design Rendering
Project Description
Project Management envisages twelve 35,000 sq. feet (approximately 3,500 sq. meters) of light deprivation greenhouses situated on fifteen acres of land, and supported by an additional 50,000 sq. feet (approximately 5,000 sq. meters) building for workspace, storage and administrative offices.
Under this model the farm will support 9,360 plants per greenhouse (for a total plant count of 112,320 plants per harvest). There will be four harvests each year for a total of 449,280 cannabis plants harvested annually. The Company estimates total farm production, once completely constructed and operating at full capacity, to be at a minimum of approximately 225,000 pounds of premium grade cannabis annually.
Project Location
GKC has entered into an agreement to purchase 15 acres of land outside of Athens in Thebes, Greece, approximately 75 minutes from Athens plans to establish the Kaya Kannabis Cultivation and Processing Facility. The region offers optimal growing conditions for cannabis and will enable the Company to produce exceptional cannabis economically.
The project location provides:
| § | 15 acres of flat land, with additional land available. |
| § | Full exposure to sunlight, without shadows cast. |
| § | Access to sufficient water, with operating wells. |
| § | Access to sufficient electricity. |
| § | Access to logistic routes. |
| § | Proximity to sufficient work force, both professional & labor. |
| § | Easy to secure (for security & safety). |
| § | Zoned for cannabis production. |
| § | Land is completely cleared and ready for construction. |
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Kaya Kannabis Medical Cannabis Production Facility in Thebes, Greece (Project Design Rendering)
Current Project Status & Developmental Timeline
On October 31, 2019 KAYS entered into an initial Memorandum of Understanding (“MOU”) setting forth an agreement in principle for KBI to acquire a 50% ownership interest in GKC, pursuant to which in consideration for KBI providing the necessary expertise related to cannabis cultivation, processing, brand development and other matters, KBI would have the right to acquire a 50% ownership interest in GKC by reimbursing GKC for 50% of its license application costs (with allowances for KBI’s expenses as well).
On April 22, 2020 KAYS/KBI received confirmation from their Greek Counsel that the Greek Government had awarded the crucial Installation License for the project. There are three licenses required for the Facility- an “Installation License” (which is the equivalent to a license to construct the facility), the “Operating License” (available only after construction is completed), and the “Production & Distribution License” (available from the EOF - the Greek equivalent to the U.S. FDA - once production can be evaluated).
On January 13, 2021 KAYS reported that its majority-owned subsidiary KBI had exercised its option to acquire a 50% Interest in GKC:
KBI acquired an initial 25% interest in GKC through a share purchase agreement with existing shareholders of GKC, which was consummated as of December31, 2020.
The remaining 25% interest is in process of being issued to KBI for a minor amount of paid in capital in recognition of KAYS and KBI’s contributions to the project.
The acquisition of the 50% interest in GKC is the cornerstone of KAYS’ planned Kaya Kannabis project, announced in late 2019 with the objective of establishing a beachhead to enter the lucrative global medical cannabis market from Greece, a member of the European Union.
On January 21, 2021 KAYS announced that the Joint Venture has named Dimitris Bouras the Lead Engineer, and his firm, Whitestone MCI, the Chief Engineering Group for the development and construction of the Company's planned cannabis cultivation and processing facility in Thebes, Greece:
Dimitris Bouras has successfully been planning and constructing large engineering projects internationally for 30 years, and serves as the CEO of Whitestone, a firm founded in 2008 that is active in engineering, design, construction and O&M of industrial, marine and commercial projects. Whitestone MCI has been active in the Medical & Industrial Cannabis Industry since 2017 and is a leading Engineering & EPC Contracting Company that offers total project development services to GACP/EU GMP Standards. Whitestone MCI currently has active projects in Greece, Cyprus, Portugal, North Macedonia, Poland and Africa.
On February 1, 2021 KAYS reported that the joint venture had engaged Dutch based Orange Ridge Capital B.V. (“Orange Ridge”) to raise up to $45 million for its planned 15-acre cannabis cultivation and processing facility in Thebes, Greece:
Orange Ridge Capital B.V. ("Orange Ridge") is registered at the Dutch Authority for the Financial Markets (AFM: Autoriteit
Financiele Markten) and is registered as an Alternative Investment Fund Manager (an "AIFMD") with the Dutch Supervisory
Authority in The Netherlands. Orange Ridge has comprehensive expertise in sustainable real asset investments that require significant
due diligence and technical expertise, access to capital, and local partnerships in strategic locations.
As an AIFMD, Orange Ridge's mission is to generate attractive investment returns from high-quality sustainable real assets such as timberland, farmland, agriculture, infrastructure, real estate, and renewable energy in Europe, the Americas, and Australasia, and provides these sustainable real asset investment solutions and strategies to a wide range of clients in Europe, the Middle East, and the Americas, such as pension funds, insurance companies, sovereign wealth funds, family offices, and investment consultants.
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Kaya Shalvah is the Israeli-based cultivation-for-export project cannabis farming project of U.S. based Kaya Brands International, Inc (“KBI”), a majority owned subsidiary of Kaya Holdings, Inc.
Kaya Shalvah Cannabis Production Facility, Greenegeve Cannabis Ecosystem, Yerucham, Isreal (Project Design Rendering)
Project Description
Kaya Shalvah will, at full capacity, comprise twenty light deprivation greenhouses, each 35,000 sq. feet (approximately 3,500 sq. meters), situated on 25 acres of land, and supported by an additional 80,000 sq. feet (approximately 8,000 sq. meters) structure for workspace, storage and administrative offices.
Under this model the farm will support 9,360 plants per greenhouse (for a full-capacity total plant count of 187,200 plants). There will be four harvests each year for a total of 748,800 cannabis plants harvested annually. The Company estimates total farm production, once completely constructed and operating at full capacity, to be at least 374,400 pounds (169,825 kilos) of premium grade cannabis annually. The targeted land is in Yerucham, Israel approximately 90 minutes from Tel Aviv.
Project Location- Greenegev Cannabis Ecosystem, Yerucham, Israel
Why Israel, and Why Yerucham
Among Israel’s chief advantages, alongside its compatible climate, are its tradition of agricultural sophistication and its status as perhaps the world’s premier cannabis research center. Israel has been a pioneer in cannabis R&D for several decades, and has one of the highest per capita rates of medical cannabis patients in the world. Yerucham has a Development Zone A designation from the Israeli government, making economic growth in the area a national priority and attaching a wide range of financial incentives to companies therein establishing operations.
Under the leadership of its Mayor, Tal Ohana, Yerucham has embarked on a program to transform the small desert town into “Greenegev”, the first cannabinoid ecosystem in Israel. The plans call for cultivation, processing and research companies to concentrate their respective activities in Yerucham, attracting services that provide each resident company with core advantages by virtue of the cooperation and support the ecosystem community is uniquely positioned to provide.
The Company meets all the prescribed criteria and the licensing process is progressing, with the full support and valuable assistance of the Yerucham mayor’s office and the municipal staff. The Company is also benefitting from the support and guidance of Major General (Res.) Amram Mitzna, a former Yerucham mayor and the current chairman of the Yerucham Fund. Yerucham has a Development Zone A designation from the Israeli government, making economic growth in the area a national priority and attaching a wide range of financial incentives to companies therein establishing operations. The process is estimated to take between 6-9 months. The Company anticipates receiving its license in early 2021, subject to final acquisition of the land.
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Layout for Yerucham-based Greenegev Cannabis Center
Current Licensing & Project Status
In late 2019 and early 2020, KBI retained the services of the Tel Aviv based law firms Zysman, Aharoni, Gayer and Sullivan Law, respectively, to assist the Company in obtaining an Israeli medical cannabis cultivation license and an Israeli license to export medical cannabis. Part of this process included the establishment of our entity to do business in Israel (Kaya Shalvah) as well as building out Kaya Shalvah’s Board of Directors and Board of Advisors (biographies listed below).
In early and mid 2020, the Company, through its attorneys, worked to prepare the requisite paperwork for its cannabis cultivation license application. On November 30, 2020 the Company submitted its application for its initial cannabis cultivation license to the Ministry of Health, Division of Medical Cannabis, and was advised that the review process would take 3 to 6 months.
As of March 20, 2021, our attorneys advised that the license was in its final stage of approval (having completed the review and screening process as an International Company applying for a cannabis license in Israel), and that the process should be completed shortly and the license issued.
Once the Company receives the license, the Company will submit its land acquisition bid for 100 Dunams (approximately 25 acres) of land to the Israel Land Authority, which is processing applications for the land bids that are part of the highly sought after Greenegez Canabis Center in Yerucham, Israel.
Potential Markets
The Company has ongoing discussions with a number of European cannabis distribution companies in an effort to sign non-exclusive supply/sales agreements for all or part of the Company’s yield, in accordance with agreed upon parameters. The Company also expects to target sales in Asia, South America, and additional markets as the global legalization of cannabis progresses. Additionally, the Company is in preliminary discussions with current medical marijuana dispensary license operators in Israel about franchising the Kaya Shack, as well as working with other medical marijuana companies on joint ventures and acquisitions.
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The Company has established a Board of Directors for Kaya Shalvah that includes:
Offer Lapidot (Brig. Gen. Res.)
A career fighter pilot in the Israel Air Force (1969-1996), Offer served two tours as a fighter squadron commander, and served as commander of the Flight Training School, commander of the Ramon Air Force base, and Head of Planning & Organization (at Air Force HQ). Offer holds the rank of Brigadier General. After his military service Offer spent a number of years in senior management positions at Israel’s leading retailer, as well as CEO of a high-tech start-up, only to miss flying and return to the skies as a pilot for El Al airlines. After his mandatory retirement from commercial flying, he joined the El Al executive team as the Director of Safety and Quality for El Al Airlines. Offer studied for his B.A. degree in Economics at Bar Ilan University, and holds an M.S. in Management from the Naval Post Graduate School in Monterey, California.
Ilan Horesh (Col. Res.)
Ilan was a career Israel Defense Forces officer, retiring in 1993 after 23 years at the rank of Colonel. During his career Ilan held numerous command positions with combat ground forces. His final assignment in the IDF was Commander of the School of Electronics and Computerization. After his military service Ilan embarked on a career as an executive and leader in the Israeli high tech sector, working with such companies as Pelephone, Bezek, Paz Oil and others. Ilan has served on the Boards of a number of Israeli companies, including Taldor Computer Systems, Ltd., Rakah Pharmaceutical Industry, Ltd., Ampa Investments, Ltd., and Retalix, Ltd.
Joseph Gayer, Adv.
Joseph “Yossi” Gayer is one of the founders of the international law firm ZAG-S&W. Yossi is a prominent expert in a number of legal fields, including commercial litigation and contracts law, representing clients both on domestic and international matters.
Yossi also represents Israel’s leading professional athletes in all fields of sports, including advising sports clubs, organizations, and sponsors in Israel and abroad. His litigation practice has yielded many legal precedents that have influenced the status of professional athletes, both in Israel and abroad, with respect to their rights vis-a-vis employers, sports authorities, and various statutory institutes. Yossi’s expertise includes insurance and property law.
Yossi lectures at the Radzyner School of Law at the Interdisciplinary Center (IDC) Herzliya.
Gadi Katz
Gadi is the founder of Total Immersion Swimming Israel “TISI”, the Israel franchise of a multinational corporation in the sports and leisure market. Gadi has built the Company to a current 70 branches operating across Israel, serving thousands of clients annually. Since founding TISI in 2006, Gadi has become expert in online marketing and has development in-house a state of the art marketing and sales Business Intelligence system. Gadi is also an expert in business development, specializing in small and mid-sized companies. Prior to TISI, Gadi was the co-founder and CFO of the American-Israeli Crisis and Issue Management (AICIM) consulting firm. AICIM specialized in high-level advisory services to politicians (including candidates for Head of State) and business leaders globally. Early in his career Gadi practiced law at what is today Israel’s largest Law Office Meitar & Co., where he engaged in various business focused matters such as Venture Capital, IPOs, M&As, Joint Ventures, Spin Offs and Corporate Restructurings. Gadi holds a B.A. in Business Administration, Magna Cum Laude, LL.B and an MBA.
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The Company’s supportive Board of Advisors includes:
Uzi Teshuva
Uzi is a second-generation Israeli farmer, active in agriculture since his teenage years. Since 1991 Uzi has served as the CEO of a farm distributes its agricultural products, grown using groundbreaking and innovative agricultural methods. Uzi became the active Chairman of TAP, an agricultural engineering and technology company specializing in the design, construction and management of agricultural farms in numerous countries worldwide.
Elon Kaplan, Ph.D.
Elon, a Ph.D. in Organizational Psychology is the Founder and CEO of Cytegic, a cutting-edge cyber-risk quantification solution predicated on the idea that enterprise risk is a combination of three key elements: technology, people, and business. Cytegic was recently sold to MasterCard. Elon brings to Kaya Shalvah the guidance of a serial entrepreneur, a scientist and a cyber-security expert. As a business leader, he excels at building exceptional teams and driving innovative breakthroughs. As an applied behavioral scientist, he is trained in specific modeling and statistical methodologies. Prior to Cytegic, Elon was Founder and CEO of Gilon Yaad, Ltd., an organizational business strategy consultancy, where he worked with many large companies, including PayPal, El-Al, Johnson & Johnson, Bank Leumi, Bank HaPoalim, Discount Bank, Maccabi Healthcare, and Comverse.
Rafi Cohen
Rafi is the Israeli Chief of Operations for Day Three Labs. Rafi has managed and overseen small and large-scale cannabis research & development projects since 2015, specializing in medicinal, cosmetic , wellness and animal health product development. For the past five years, Rafi has been dedicated exclusively to working within the emerging Israeli and global cannabis industry, recognizing the commercial and medicinal potential of cannabis. Rafi has distinctive experience in cannabis research projects, product development, clinical studies, investments, and joint ventures. Rafi began his career as a corporate attorney with Fischer Behar Chen Well Orion & Co., where he focused on M&A and strategic corporate development. Later he was a founding partner at Cohen, Light, Ziv and Associates. Rafi has a B.ed. from Herzog College of Education, an MA from Yeshiva University in New York City and an LL.B. from the Hebrew University in Jerusalem.
Josh Rubin
Josh is the founder and CEO of Day Three Labs (DTL). Headquartered in Denver, Colorado and with research operations in Israel, DTL seeks to disrupt the cannabis industry by introducing Israeli cannabis related innovations to the North American and global markets. Josh began his career in the cannabis industry in 2017 as a consultant analyzing trends in the cannabis market. Recognizing the opportunity to bridge the North American and Israeli cannabis sectors, he launched DTL. Josh was well suited to establish DTL, for in addition to his extensive network in Israel, he speaks Hebrew and has experience living and working in Israel. During a five year period in Israel Josh studied at the Hebrew University and the Interdisciplinary College in Herzliya (IDC), worked in the Knesset, and worked for the International Institute for Counter-Terrorism as a researcher. Josh even found time to volunteer as a medic for Magan David Adom. Josh has a Masters of Business Administration from Johns Hopkins University (Marketing), a Masters Degree from IDC in Government and a Bachelor of Arts Degree from Queens College (Psychology & Philosophy).
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Government Regulation
We are subject to general business regulations and laws, as well as regulations and laws directly applicable to our operations. As we continue to expand the scope of our operations, the application of existing laws and regulations could include matters such as pricing, advertising, consumer protection, quality of products, and intellectual property ownership. In addition, we will also be subject to new laws and regulations directly applicable to our activities.
Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, which could hinder or prevent the growth of our business.
Federal, state and local laws and regulations governing legal recreational and medical marijuana use are broad in scope and are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws or allegations of such violations could disrupt our planned business and adversely affect our financial condition and results of operations. In addition, it is possible that additional or revised federal, state and local laws and regulations may be enacted in the future governing the legal marijuana industry. There can be no assurance that we will be able to comply with any such laws and regulations and its failure to do so could significantly harm our business, financial condition and results of operations.
Competition
The legal marijuana sector is rapidly growing and the Company faces significant competition in the operation of retail outlets, MMDs and grow facilities. Many of these competitors will have far greater experience, more extensive industry contacts and greater financial resources than the Company. There can be no assurance that we can adequately compete to succeed in our business plan.
Employees
As of the date as of this Report, our Oregon operations have a total of 12-15 part-time store employees including budtenders, trimmers, growers, and4 full-time employees, consisting of the Senior Vice President of Cannabis Operations, the Vice President of Marketing and Brand development, and 2 store managers. Additionally, we engage several consultants to assist with daily duties and business plan implementation and execution. Additional employees will be hired and other consultants engaged in the future as our business expands.
Potential Effects of the COVID-19 Pandemic on our Business
The adverse public health developments and economic effects of the COVID-19 pandemic in the United States and overseas could adversely affect the Company’s customers and suppliers as a result of quarantines, facility closures and logistics restrictions in connection with the outbreak. More broadly, the COVID-19 pandemic could potentially lead to an extended economic downturn, which would likely decrease spending, adversely affect demand for our products and services, slow our international expansion plans, harm our business, results of operations and financial condition. The Company cannot accurately predict the effect the COVID-19 pandemic will have on the Company.
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Results of Operations
Three months ended March 31, 2021 compared to three months ended March 31, 2020
Revenues
We had revenues of $237,018 for the three months ended March 31, 2021 which was relatively unchanged as compared to revenues of $235,311 for the three months ended March 31, 2020.
Cost of Goods Sold
Our cost of goods sold for the three months ended March 31, 2021 was $75,814 compared to cost of goods sold of $48,887 for the three months ended March 31, 2020. The increase in cost of goods sold was due to normal fluctuation in the wholesale cannabis market as well as the fact that we have curtailed production at our production and processing facility in Eugene while we await relicensing of the facility and are temporarily purchasing more of our products from third party vendors.
Salaries and Wages
Salaries and Wages decreased to $86,983 for the three months ended March 31, 2021 as compared to $141,680 for the three months ended March 31, 2020. The decrease in salaries and wages was due to normal decrease in labor cost as well as the fact that we have less staff while we await relicensing of our production and processing facility in Eugene.
Selling, General and Administrative Expenses
Selling, general and administrative was relatively unchanged at $195,650 for the three months ended March 31, 2021 as compared to $199,558 for the three months ended March 31, 2020.
Professional Fees
Professional fees were $207,714 for the three months ended March 31, 2021, as compared to $175,306 for the three months ended March 31, 2020. The increase in professional fees was a result of increased costs in this category as we moved to implement our international expansion plans.
Gain or Loss on Impairment of Assets
Gain on impairment of assets was $31,671 for the three months ended March 31, 2021, as compared to $0 for the three months ended March 31, 2020.
Interest Expense
Interest expense and debt amortization expense increased slightly to $149,859 for the three months ended March 31, 2021 from $137,450 for the three months ended March 31, 2020. These increases were due to more debt incurred over the past 12 months for expansion of our operations.
Amortization of Debt Discount
Amortization of debt discount was $142,977 for the three months ended March 31, 2021, as compared to $138,776 for the three months ended March 31, 2020.
Derivative Liabilities Expense
Derivative liabilities expense increased to $380,063 for the three months ended March 31, 2021 from $28,887 for the three months ended March 31, 2020. These increases were due to change in stock price as well as the volatility factors used in the derivative calculations.
Change in Fair Value of Embedded Derivative Liabilities
Change in fair value of embedded derivative liabilities was a loss an expense of $4,535,437 for the three months ended March 31, 2021 compared to an expense of $74,770 for the three months ended March 31, 2020. These changes were due to change in stock price as well as the volatility factors used in the derivative calculations.
Other Income/(Loss)
Other income was a loss of ($5,208,336) the three months ended March 31, 2021 as compared to ($379,883) for the three months ended March 31, 2020. The increased loss was due largely to a change in derivative liability expenses resulting from a change in stock price as well as the volatility factors used in the derivative calculations.
Net Income
We incurred net loss of ($5,505,808) for the three months ended March 31, 2021, as compared to a net loss of ($710,003) for the three months ended March 31, 2020. The majority of our net loss during the three-month period ending March 31, 2020 was a result of the derivative liabilities associated with our Convertible Debt and a reduction in our stock price as well as the less volatility factors used in the derivative calculations. The non-controlling interest for the three months ended March 31, 2021 and 2020 was a gain of $14,400 and a loss of $52,236, respectively.
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Liquidity and Capital Resources
May 2017 Financing
On May 11, 2017, we entered into a second financing agreement with Cayman Venture Capital Fund (the “Institutional Investor”) which had previously completed approximately $3.3 Million in in financing as listed in the 2018 10-K and previous filings to provide the Company with up to an additional $5.8 million in convertible note funding (the “ May 2017 Notes \ ”) through July 31, 2018 (the “ May 2017 Financing Agreement ”). The May 2017 Financing Agreement was amended as of July 31, 2017, to increase the amount of funding available to the Company thereunder to $6.3 million and to extend the time period for such funding to May 31, 2019 and was subsequently amended as of November 15, 2017 and as of March 31, 2018, to further increase the amount of funding available to the Company thereunder to $7.75 million and to provide for the remaining $5.8million in principal amount of May 2017 Notes to be (a) convertible into shares of the Company’s common stock at conversion prices ranging from $0.03 to $0.11 pursuant to the terms of each May 2017 Note as described below; and (b) to extend the time period for such funding to April 30, 2020.
Pursuant to an additional agreement reached as of March 31, 2018, KAYS and the Institutional Investor agreed that effective as of January 1, 2019, (a) the maturity date of all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, will be extended from January 1, 2019 to January 1, 2020; (b) all of the $1.75 million in principal amount of May 2017 Notes currently outstanding and the remaining $5.8 million in principal amount of May 2017 Notes which may be issued under the Agreement, as amended, are to be secured by a mortgage lien on the Company’s 26-acre Lebanon, Oregon property, substantially similar in form and substance to the mortgage securing the $500,000 in principal amount of $0.03 Secured Notes purchased by the Institutional Investor, with the caveat that the property, improvements or rights to utilize them cannot be directly or indirectly leased, assigned or otherwise pledged to any entity without approval of the Institutional Investor, and in the event that there is a change in control of the Company or its subsidiaries the May 2017 Notes become immediately due and payable; and (c) the Institutional Investor was be granted piggy-back registration rights with respect to shares of the Company’s common stock it may hold or is issuable upon conversion of any Notes it or its Assigns may hold in the event the Company files a Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended to sell shares of its common stock or permit the resale by shareholders of previously issued shares of common stock, up to a maximum of 30% of the shares registered under such registration statement.
Effective as of January 20, 2019, the Agreement was further amended to: (a) extend the due dates for funding due under the Agreement for each of the remaining trenches (including the $420,000 remaining “$0.03” Notes that were due to expire December 31, 2018) by six (6) months; (b) agree to extend the maturity date all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, from January 1, 2020 to January 1, 2021; and (c) pursuant to price adjustment features in the outstanding Notes held by the Institutional Investor, the Company confirmed that all outstanding Notes with a conversion price greater than $0.03 held by the Institutional Investor would be lowered to $0.03 per share at time of conversion.
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Effective as of January 1, 2020, the Agreement was further amended to: (a) extend the maturity date all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, from January 1, 2021 to January 1, 2024; (b) notwithstanding item “a” upon the Company receiving US$4,000,000.00 in new financing from sources other than the Holder, the Holder shall have the option to have the Company allocate 10% of any additional financing beyond this amount for purposes of early repayment of any Notes still held by the Holder; (c) notwithstanding item “a” provide for an “Acceleration Provision” in the event of a change in the event that Craig Frank is no longer the CEO of the Company, and/or W. David Jones is no longer retained to provide Business Consulting Services to the Company through BMN Consultants (either through resignation, termination or through determination by the Board of Directors that the respective party is medically incapable of conducting their duties), then the Holder of this Note is entitled to enact the Acceleration Provision by notifying the Company’s Board of Directors or Corporate Counsel which provides for the Maturity Date to be accelerated from January 1, 2024 to ninety (90) days from receipt of said notice; (d) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (e) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (f) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share.
Effective as of July 22, 2020, pursuant to certain ratchet provisions within the Notes and in consideration of further concessions and additional financing assistance provided by the Institutional Investor, the Agreement was further modified so that the Conversion Price of all Notes held by the Institutional Investor and its affiliate, NWP Finance LTD have been reduced to $0.01 (0.15 post-split) per share, subject to certain adjustments in the event of stock dividends, splits and similar recapitalization events.
As of the date of this report, the Institutional Investor has purchased an aggregate of $3,185,000 in principal amount of May 2017 Notes from the Company under the May 2017 Financing Agreement, as amended to date.
January 2018 Financing
Effective January 22, 2018, and amended as of July 31, 2018 we entered into a financing agreement with a high net worth investor (the “ HNW Investor ”) to provide the Company with up to $1.4 million in convertible note funding (the “ January 2018 Notes ”) through July 31, 2018 (the “ January 2018 Financing Agreement ”). Pursuant to the January 2018 Financing Agreement, upon execution of the January 2018 Financing Agreement, the HNW Investor purchased $100,000 in principal amount of January 2018 Notes, which are convertible into shares of the Company’s common stock at a conversion price of $0.10 per share (the “$0.10 Notes ”).
While the January 2018 Financing Agreement granted the HNW Investor the right to acquire additional January 2018 Notes by certain deadlines if additional funding was provided, no additional $0.10 Notes were purchased until the January 2018 Financing Agreement was amended in December, 2018 to allow the HNW investor the right to purchase an additional $25,000 of January 2018 Notes, which are convertible into shares of the Company’s common stock at a conversion price of $0.05 per share (the “$0.05 Notes ”).
In January 2019 the Agreement was amended to lower the conversion price of the previously purchased $0.10 Note to $0.05, and to modify terms of the $0.10 Note to make them consistent with the May 2017 Financing Agreement executed with the Institutional Investor, and to allow for the right of the HNW Investor to acquire an additional $200,000 of January 2018 Notes, which are convertible into shares of the Company’s common stock at a conversion price of $0.03 per share (the “$0.03 Notes ”). In March, 2019 the agreement was further amended to lower the conversion prices of the previously issued $0.05 Notes to $0.03.
Effective as of January 1, 2020, the Agreement was further amended to: (a) extend the maturity date all then outstanding Company promissory notes held by the High Net Worth Investor Institutional Investor to January 1, 2021 (b) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (c) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (d) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share amount.
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Effective as of July 22, 2020, pursuant to certain ratchet provisions within the Notes and in consideration of further concessions and additional financing assistance provided by the Institutional Investor, the Agreement was further modified so that the Conversion Price of all Notes held by the HNW Investor have been reduced to $0.01 (0.15 post- split) per share, subject to certain adjustments in the event of stock dividends, splits and similar recapitalization events.
As of the date of this report, the Institutional Investor has purchased an aggregate of $295,000 in principal amount of May 2017 Notes from the Company under the January 2018 Financing Agreement, as amended to date.
All the above securities were issued pursuant to the exemption from registration under the Securities Act afforded by Section 4(a)(2) thereof and Regulation D thereunder.
Use of Proceeds
The proceeds from the offer and sale of the $2.1M Notes, the May 2017 Notes and the January 2018 notes, as well as any other financing transactions that the Company may enter into are and will be used to fund the our growth plan, including the development, operation and expansion of our Kaya Shack™ and Kaya Farms™ operations in Oregon, the development of our new Kaya Shack™ branded cannabis products, and the groundwork required to initiate our planned expansion through Kaya Brands International initiatives in Canada, Greece and Israel.
Plan of Operations
Management believes that further proceeds expected to be received from the above described financings as well as any other financing transactions that it is seeking to enter into, combined with existing and anticipated revenues, will alleviate the Company’s financial difficulties to a significant extent and will allow the Company to meet its anticipated working capital needs for a period of between twelve and eighteen months from the date of this report. However, there can be no assurance that further funding from the May 2017 Financing, the January 2018 Financing or other contemplated financings will be achieved, or if achieved that they will be successful to the level required to meet the Company’s cash needs, or that management’s belief will be correct and that the Company will not sooner require additional financing to meet its working capital needs prior to achieving profitability or positive cash flow. Moreover, we may not be successful in raising additional capital on commercially reasonable terms, if and when needed, in which case our business, financial condition, cash flows and results of operations may be materially and adversely affected.
Note Conversions
No notes were converted during the period.
Employee Stock Plan Issuances and Director and Officer Restricted Stock issuances
No Employee Stock Plan Issuances or Director and Officer Restricted Stock Issuances were issued during the period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
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Under the direction of Chief Executive Officer and Acting Chief Financial Officer (our principal executive, financial and accounting officer), we evaluated our disclosure controls and procedures as of March 31, 2021. Our Chairman and President, who is our principal, executive, financial and accounting officer, concluded that our disclosure controls and procedures were not effective as of March 31, 2021.
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive, financial and accounting officer), as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost benefit relationship of possible controls and procedures.
As required by SEC Rule 13a15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (our principal executive, financial and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of the first fiscal quarter covered by this report. Based on the foregoing, our Chief Executive Officer (our principal executive, financial and accounting officer) concluded that our disclosure controls and procedures were not effective. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Controls
There was no change in our internal controls or in other factors that could affect these controls during the six months ended June 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. We do not anticipate any changes to our internal controls at this time.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
A. Licensing Update- Kaya Farms Greenhouse Grow and Production Facility, Lebanon, Oregon
On February 9, 2018 KAYS submitted a site plan review for the Company’s envisioned 101,000 square foot OLCC licensed Kaya FarmsTM Marijuana Grow and Manufacturing Complex and an application for a conditional use permit for marijuana processing on the Company owned 26.50-acre property zoned Exclusive Farm Use (EFU) with the Linn County, Oregon Planning and Building Department.
On March 9, 2018 the Company was notified by the Linn County, Oregon Planning and Building Department (the “ Department ”) that the application was deemed complete and received an official letter of completeness with respect to the application. The formal “ Letter of Completeness ,” sent March 9, 2018 by a Linn County Senior Planner, confirmed the eligibility of the Company’s 26-acre plot for the purposes of growing legal cannabis, as well as the eligibility of the property for a special purpose exemption for the Company’s proposed manufacturing operations.
On April 20, 2018 the Company was notified by the Department that the site plan review for the indoor and outdoor marijuana operation on the 26.50-acre property (which encompasses approximately 86,000 square feet of the Company’s 101,000 square feet of the Company’s submitted buildings) had been approved. However, the conditional use permit for marijuana processing (which encompasses approximately 15,000 square feet of the Company’s 101,000 square feet of the Company’s submitted buildings) had been denied, largely due to the scale and coverage of the proposed processing operation. Additionally, local residents requested a hearing to appeal the approval of the site plan based on concerns that a portion of the approved site plan that supports the 36,000 square feet of green houses for outdoor growing is not eligible for the Irrigation rights that the Company possesses for the Property.
On June 12, 2018 the Linn County Planning Commission held a hearing and adopted a motion to Deny the previously approved site plan, citing that the proposed site plan does not comply with the odor and waste management standards set forth in Section 940.400 of the Linn County Development Code.
On August 7, 2018 KAYS filed a Notice of Appeal with the State of Oregon Land Use Board of Appeals (LUBA).
On October 9, 2018, Larkins Vacura Kayser LLP (“LVKLAW”), Oregon Counsel, received a letter from Linn County’s Attorney notifying them that Linn County did not intend to file a response brief or appear at the State of Oregon Land Use Board of Appeals (“LUBA”) hearing, and shortly thereafter LUBA cancelled the LUBA Hearing.
On November 13, 2018 LUBA issued its FINAL OPINION AND ORDER (the “Order”). The Order reversed the County’s decision and ordered the County to approve the Company’s Land Use Application for the to-be-built 85,000-square foot Kaya Farms & Greenhouse Facility in Lebanon, Oregon.
On August 16th, 2019 the Land Use Board of Appeals issued an order granting attorney’s fees and costs in the amount of $25,158 be paid to KAYS and the funds were received in September, 2019. The proceeds were recorded net against costs incurred, noting no gain or loss.
On November 12, 2020 the Company received official notification from the OLCC that they were ready to move forward on the KAYS license application for their Kaya Farms Greenhouse Grow and Production facility located in Lebanon, Oregon, and on November 13, 2020 KAYS met with Linn County Zoning Officials and filed for and received a one year extension of their Zoning Permits so as to allow for scheduling of construction and OLCC licensing inspections after the facility is completed.
The facility features approximately 85,000 square feet of buildings and greenhouses on approximately 26.5 acres in the heart of Oregon’s Agriculture Country in Linn County. Under present laws the property can easily deliver 6-8,000 pounds of cannabis each year; if future regulations permit this capacity could easily be increased to over 100,000 pounds of cannabis per year.
KAYS is still working out logistics but is targeting the facility to be functionally complete by mid-fall 2021. 37
B. Settlement with Sunstone, Burwick regarding non-transferability of Sunstone Grow License
As previously reported in our periodic reports filed under the Securities Exchange Act of 1934, in the fourth quarter of 2018, KAYS concluded the purchase of the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the Oregon Liquor Control Commission (the “ OLCC ”) for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. KAYS entered into a management agreement with the holder of existing OLCC licenses (“ Sunstone ”) to oversee operations at the facility pending transfer of the license to KAYS, which were aware would be an extended and cumbersome process.
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In mid-April 2019, we were advised by Sunstone that it had been notified that the OLCC was proposing that Sunstone’s licenses be cancelled, claiming that that Sunstone had not filed paperwork correctly with respect to the transaction or its historical ownership.
At the OLCC’s Administrative Hearing Session held on October 15, 2020, the OLCC approved a settlement between the Oregon Liquor Control Commission (OLCC) and Sunstone Marketing Partners that required theirs license to either be sold to a third party (other than KAYS) or surrendered.
As the settlement between the OLCC and Sunstone/Burwick deemed that the licenses that were part and parcel of the purchase were ultimately non-transferrable to KAYS by the OLCC, the Company recently negotiated a settlement with the seller (Sunstone and Bruce Burwick) that allows for the return of all 1,006,671 shares issued to the seller as part of the transaction (the 773,336 shares for the facility purchase, the 166,667 shares issued for $250,000.00, and subsequent shares issued as annual compensation for Board Member Compensation) in exchange for allowing the seller to retain the proceeds of the sale of the grow license to an unrelated third party that is in process of obtaining approvals from the OLCC to relocate it to another location, as well as provides for the seller to resign from the Board of Kaya Holdings and work as a non-exclusive consultant to the Company for the next 48 months for a total four year fee of $140,000.00.
The settlement between Sunstone and KAYS is effective March 31, 2021 but is contingent on Sunstone receiving the proceeds of the sale of the grow license to the unrelated third party as described above; the Company has been advised that the funds are in escrow for release pending the OLCC transfer approval which should be sometime prior to June 30, 2021.
As part of a larger production and processing plan that would allow for a more efficient Production and Processing plan and economy of scale, the Company is presently in the process of submitting a new OLCC Marijuana Processing License for the 12,000 facility, and plans to renovate and dedicate the facility to produce various brands of oils, edibles, concentrates and extracts, and develop medical grade laboratory facilities for the production of a proprietary Kaya CannaceuticalsTM, while conducting all future grow operations at the Lebanon Kaya Farms Ag Facility upon completion of construction and licensing
C. Service Provider and Vendor Litigation and Settlements
| · | · On December 3, 2020 a suit was filed against Kaya Shack/MJAI Oregon 1 by a Groen Chocolate claiming non-payment of a Vendor Invoice in the amount of $7,196.50. A settlement was reached February 22, 2021 which requires that required payment of $7,186.50 of which $1,196.50 remains to be paid. |
| · | · On January 21, 2021 a suit was filed against Kaya Holdings, Inc. and MJAI Oregon 1, LLC dba Kaya Shack by Northwest Confection claiming non-payment of a Vendor Invoice in the amount of $28,363.52. The Company’s Oregon counsel is in process of responding to the suit and also discussing a settlement. |
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Item 1A. Risk Factors.
See “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 27, 2021 the Company received $15,000 for the sale of 50,000 shares of the Company’s restricted stock via a private placement to an individual investor.
On January 22, 2021, the Company issued a Convertible Promissory Note to High Net Worth Investor in exchange for payment totalling $60,000.
On February 28, 2021 the Company issues a Convertible Promissory Note to the High Net Worth Investor in exchange for payments totaling $100,000.00
On March 31, 2021 the Company issues a Convertible Promissory Note to the High Net Worth Investor in exchange for payments totaling $50,000.00
On March 8, 2021 the Company received $20,000 for the sale of 66,666 shares of the Company’s restricted stock via a private placement to an individual investor.
All of the foregoing securities were issued pursuant to the exemption from the registration afforded by Section 4 (a) (2) of the Securities act of 1933, as amended and the rules and regulations thereunder.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None
Item 6. Exhibits
| Exhibit No. | Description of Exhibit | ||
| 31.1 | Section 302 Certification |
| 32.1 | Section 906 Certification |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: May 17, 2021
KAYA HOLDINGS, INC.
By: /s/ Craig Frank
Craig Frank, Chairman, President, Chief Executive Officer and Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer)
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