Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 15, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Kaya Holdings, Inc. | ||
Entity Central Index Key | 0001530746 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 20,983,182 | ||
Entity Common Stock, Shares Outstanding | 173,598,080 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS: | ||
Cash and equivalents | $ 111,512 | $ 318,462 |
Inventory - Net of Allowance | 131,542 | 118,296 |
Prepaid Expenses | 20,541 | 9,093 |
Total Current Assets | 263,595 | 445,851 |
OTHER ASSETS: | ||
Deposits | 31,523 | 98,497 |
Property and equipment, net | 2,348,780 | 897,565 |
Total Other Assets | 2,380,303 | 996,062 |
Total Assets | 2,643,898 | 1,441,913 |
CURRENT LIABILITIES: | ||
Accounts payable and accrued expense | 562,016 | 464,461 |
Accounts payable and accrued expense - related parties | 7,737 | 8,923 |
Accrued interest | 659,169 | 302,341 |
Convertible Notes Payable-related party-net of discount | 500,000 | |
Convertible notes payable-net of discount | 2,894,294 | 355,000 |
Notes Payable | 9,312 | 64,782 |
Notes Payable-Related Party | 250,000 | |
Derivative liabilities | 19,783,034 | 30,343,609 |
Total Current Liabilities | 23,915,562 | 32,289,116 |
Convertible Note Payable - related party - Net of Discount | 500,000 | |
Convertible Note Payable-Net of Discount | 1,283,557 | 1,555,206 |
Notes Payable-realated party | 250,000 | |
Total Long Term Liabilities | 2,033,557 | 1,555,206 |
Total Liabilities | 25,949,119 | 33,844,322 |
STOCKHOLDERS' EQUITY (DEFICIT): | ||
Convertible Preferred Stock, Series C, par value $.001; 10,000,000 shares authorized; 49,900 and 49,900 issued and outstanding at December 31, 2018 and December 31, 2017 | 50 | 50 |
Common stock , par value $.001; 500,000,000 shares authorized; 165,812,128 shares issued as of December 31, 2018 and 138,993,087 shares issued as of December 31, 2017 | 165,812 | 138,993 |
Subscriptions payable | 397,209 | 152,796 |
Additional paid in capital | 17,100,137 | 12,811,671 |
Accumulated Deficit | (39,924,912) | (44,672,209) |
Non-controlling Interest | (1,043,517) | (833,710) |
Net Stockholders' Equity/(Deficit) | (23,305,221) | (32,402,409) |
Total Liabilities and Stockholders' Equity/(Deficit) | $ 2,643,898 | $ 1,441,913 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Preferred Stock Series C Par Value | $ .001 | $ .001 |
Preferred Stock Series C Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock Series C Shares Issued | 49,900 | 49,900 |
Preferred Stock Series C Shares Outstanding | 49,900 | 49,900 |
Common Stock Par Value | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 500,000,000 | 500,000,000 |
Common Stock Shares Issued | 165,812,128 | 138,993,087 |
Common Stock Shares Outstanding | 165,812,128 | 138,993,087 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Net Sales | $ 1,136,599 | $ 966,382 |
Cost of Sales | 494,088 | 394,424 |
Gross Profit | 642,511 | 571,958 |
Operating Expenses: | ||
Professional Fees | 2,055,893 | 809,808 |
Salaries and wages | 574,107 | 436,163 |
General and administrative | 883,138 | 1,313,254 |
Total Operating Expenses | 3,513,138 | 2,559,225 |
Operating Loss | (2,870,627) | (1,987,627) |
Other Income(expense): | ||
Interest expense | (541,038) | (354,374) |
Legal Settlement | (247,500) | |
Amortization of Debt discount | (2,583,712) | (2,267,026) |
Derivative liabilities expense | (3,370,329) | (18,377,623) |
Gain(Loss) on Extinguishment of Debt | (67,442) | |
Loss on disposal of fixed assets | (10,846) | |
Change in derivative liabilities expense | 13,900,712 | 8,221,485 |
Other income (expense) | 2,484 | |
Total Other Income(Expense) | 7,408,117 | (13,103,326) |
Net income (loss) | 4,537,490 | (15,090,593) |
Net (Loss) attributed to non-controlling interest | 209,807 | 208,800 |
Net income (loss) attributed to Kaya Holdings, Inc. | $ 4,747,297 | $ (14,881,793) |
Net income (loss) per common share - Basic | $ 0.03 | $ (0.12) |
Net income (loss) per common share - Diluted | $ 0.01 | $ (0.12) |
Weighted average number of common shares outstanding - Basic | 150,208,343 | 127,972,813 |
Weighted average number of common shares outstanding - Diluted | 382,809,688 | 127,972,813 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
OPERATING ACTIVITIES: | ||
Net Income/(Loss) | $ 4,747,297 | $ (15,090,593) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Net Loss Attributable to non-controlling interest | (209,807) | (208,800) |
Depreciation | 161,223 | 68,166 |
Imputed interest | 69,926 | 30,000 |
Loss (Gain) on Extinguishment of Debt | 67,442 | |
Loss on disposal of fixed assets | 10,846 | |
Derivative Expense | 3,370,329 | 18,377,623 |
Change in derivative liabilities | (13,900,712) | (8,221,485) |
Amortization of debt discount | 2,583,712 | 2,267,026 |
Stock to be issued for services - related parties | 942,400 | |
Stock issued for services | 301,510 | 127,010 |
Stock issued for interest | 52,536 | |
Changes in operating assets and liabilities: | ||
Prepaid expense | (11,447) | (4,594) |
Inventory | (13,246) | (34,299) |
Deposits | 66,974 | 23,527 |
Other assets | ||
Accrued Interest | 397,471 | 342,300 |
Accounts payable and accrued expenses | 162,796 | (20,949) |
Net cash used in operating activities | (1,331,574) | (2,214,244) |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (195,238) | (749,812) |
Net cash used in investing activities | (195,238) | (749,812) |
FINANCING ACTIVITIES: | ||
Proceeds from common stock subscriptions | 300,000 | |
Proceeds from convertible debt | 1,075,333 | 3,150,000 |
Payment on convertible debt | ||
Proceeds from Notes Payable | 80,000 | |
Payments on Note Payable | (55,471) | (254,366) |
Net cash provided by financing activities | 1,319,862 | 2,975,634 |
NET INCREASE IN CASH | (206,950) | 11,578 |
CASH BEGINNING BALANCE | 318,462 | 306,884 |
CASH ENDING BALANCE | 111,512 | 318,462 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Taxes paid | ||
Interest paid | 17,166 | |
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES: | ||
Reclassification of derivative liability to additional paid in capital | 1,184,821 | |
Value of common shares issued for acquisition of fixed assets | 1,417,200 | |
Value of common shares issued as payment of debt and interest | 291,483 | 560,254 |
Value of common shares issued as payment of interest | 52,536 | |
Initial Derivative on Convertible notes payable | $ 1,154,629 |
Statement of Stockholder's Equi
Statement of Stockholder's Equity - USD ($) | Preferred Stock | Common Stock | Subscription Payable | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest | Total |
Beginning Balance, Shares at Dec. 31, 2016 | 49,900 | 117,076,795 | |||||
Beginning Balance, Value at Dec. 31, 2016 | $ 50 | $ 117 | $ 272,400 | $ 9,035,740 | $ (29,790,416) | $ (624,910) | $ (20,990,060) |
Reclassified dervative liabilities to apic | 2,960,979 | 2,960,979 | |||||
Imputed Interest | 30,000 | 30,000 | |||||
Common stock issued for services, Shares | 650,000 | ||||||
Common stock issued for services, Value | $ 650 | (53,500) | 168,730 | 115,880 | |||
Common Stock to be issued for services | 11,130 | 11,130 | |||||
Common stock for debt conversion and interest, Shares | 21,266,292 | ||||||
Common stock for debt conversion and interest, Amount | $ 21,267 | (77,234) | 616,222 | 560,255 | |||
Net Loss | (14,881,793) | (208,800) | (15,090,593) | ||||
Ending Balance, Shares at Dec. 31, 2017 | 49,900 | 138,993,087 | |||||
Ending Balance, Value at Dec. 31, 2017 | $ 50 | $ 138,993 | 152,796 | 12,811,671 | (44,672,209) | (833,710) | (32,402,409) |
Imputed Interest | 69,926 | 69,926 | |||||
Common stock issued for services, Shares | 2,200,000 | ||||||
Common stock issued for services, Value | $ 2,200 | 65,000 | 234,310 | 301,510 | |||
Common stock Issued for cash, Shares | 3,000,000 | ||||||
Common stock Issued for cash, Value | $ 3,000 | 297,000 | 300,000 | ||||
Common stock to be issued for acquisition of fixed assets, Shares | 12,000,000 | ||||||
Common stock to be issued for acquisition of fixed assets, Amount | $ 12,000 | 1,405,200 | 1,417,200 | ||||
Common stock for debt conversion and interest, Shares | 3,419,041 | ||||||
Common stock for debt conversion and interest, Amount | $ 3,419 | 179,413 | 161,009 | 343,841 | |||
Pursuant director compensation policy, Shares | 6,200,000 | ||||||
Pursuant director compensation policy, Amount | $ 6,200 | 936,200 | 942,400 | ||||
Reclassification of derivative liability related to convertible notes | 1,184,821 | 1,184,821 | |||||
Net Loss | 4,747,297 | (209,807) | 4,537,490 | 4,747,297 | |||
Ending Balance, Shares at Dec. 31, 2018 | 49,900 | 165,812,128 | |||||
Ending Balance, Value at Dec. 31, 2018 | $ 50 | $ 165,812 | $ 397,209 | $ 17,100,137 | $ (39,924,912) | $ (1,043,517) | $ (23,305,221) |
ORGANIZATION AND NATURE OF THE
ORGANIZATION AND NATURE OF THE BUSINESS | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
ORGANIZATION AND NATURE OF THE BUSINESS | 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 three subsidiaries, Alternative Fuels Americas, Inc, a Florida corporation, which is wholly-owned, Marijuana Holdings Americas, Inc., a Florida corporation (“MJAI”), which is majority-owned and 34225 Kowitz Road, LLC, a wholly-owned Oregon limited liability company which holds the Company’s recently acquired 26 acre property in Lebanon, Oregon on which it plans to develop a legal cannabis cultivation and manufacturing facility. 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, MJAI Oregon 3 LLC, MJAI Oregon 4 LLC and MJAI Oregon 5 LLC (Inactive). 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. 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. Our OLCC License for the Central Salem Kaya Shack™ Marijuana Superstore (Kaya Shack™ OLCC Marijuana Retailer License #4) has been filed and is pending completion, inspection and final licensing. During August of 2017, we purchased 26 acres in Lebanon, Oregon, for development as a legal cannabis cultivation and manufacturing facility. The company is in the process of planning and permitting. On February 15, 2018, we received our OLCC recreational, medical and home delivery license for the Central Salem Kaya Shack TM TM TM On August 18, 2018, the Company had concluded the purchase of the Eugene, Oregon based Sunstone Farms manufacturing facility, which is licensed by the OLCC for both the production of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. The purchase includes a 12,000 square foot building housing and indoor grow facility, as well as equipment for growing and extraction activity. The facility can produce in excess of 800 pounds cannabis flower annually as currently outfitted. As part of planned expansion and renovations for the facility, the Company has begun the site improvements and is ramping up production to feed the existing four OLCC licensed cannabis retail stores in Oregon. |
LIQUIDITY AND GOING CONCERN
LIQUIDITY AND GOING CONCERN | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
LIQUIDITY AND GOING CONCERN | NOTE 2 – LIQUIDITY AND GOING CONCERN The Company’s consolidated financial statements as of December 31, 2018 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 income of $4,747,297 for the year ended December 31, 2018 and a net loss of $14,881,793 for the year ended December 31, 2017. The increase in net income is due to the changes in derivative liabilities and the company continues to have operating losses. At December 31, 2018 the Company has a working capital deficiency of $23,651,967 and is totally dependent on its ability to raise capital. The Company has a plan of operations and acknowledges that its plan of operations may not result in generating positive working capital in the near future. Even though management believes that it will be able to successfully execute its business plan, which includes third-party financing and capital issuance, and meet the Company’s future liquidity needs, there can be no assurances in that regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this material uncertainty. Management recognizes that the Company must generate additional funds to successfully develop its operations and activities. Management plans include: • the sale of additional equity and debt securities, • alliances and/or partnerships with entities interested in and having the resources to support the further development of the Company’s business plan, • business transactions to assure continuation of the Company’s development and operations, • development of a unified brand and the pursuit of licenses to operate recreational and medical marijuana facilities under the branded name. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION | 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. 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: · Alternative Fuels Americas, Inc. (a Florida corporation) · 34225 Kowitz Road, LLC (an Oregon LLC) Majority-owned subsidiaries: · Marijuana Holdings Americas, Inc. (a Florida corporation) o MJAI Oregon 1 LLC o MJAI Oregon 2 LLC o MJAI Oregon 3 LLC o MJAI Oregon 4 LLC o MJAI Oregon 5 LLC Non-Controlling Interest The company owns 55% of Marijuana Holdings Americas, 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 December 31, 2018 is $131,542 and $118,296 as of December 31, 2017. No allowance as necessary as of December 31, 2018 and 2017 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 5-7 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. Real Property or Land is stated at cost and not depreciated. It is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount not be recoverable. 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. 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: • 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 December 31, 2018 Level 1 Level 2 Level 3 Assets Cash $ 111,512 $ $ Total assets 111,512 - - Liabilities Convertible debentures, net of discounts of $1,191,264 - - 4,677,851 Short term debt, net of discounts of $-0- - 259,312 - Derivative liability - - 19,783,034 Total liabilities - 259,312 19,783,034 $ 111,512 $ (259,312) $ 24,460,885 Fair Value Measurements at December 31, 2017 Level 1 Level 2 Level 3 Assets Cash $ 318,462 $ $ Total assets 318,462 - - Liabilities Convertible debentures, net of discounts of $2,620,341 - - 2,410,206 Short term debt, net of discounts of $-0- - 314,782 - Derivative liability - - 30,343,609 Total liabilities - 314,782 32,753,815 $ 318,462 $ (314,782) $ (32,753,815) 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. 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 The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). Pursuant to ASC Section 505-50-30, 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 (“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-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. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. 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. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 – Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. The Company believes that there are no material changes or financial impact to the 2017 Financials based on the adoption of ASC 606 – Revenues from Contracts with Customers. 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 |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY, PLANT AND EQUIPMENT | NOTE 4 – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 (Audited) (Audited) ATM Machine $ 11,000 $ 8,300 Computer 22,736 15,833 Furniture & Fixtures 49,408 39,655 HVAC 25,000 - Land 697,420 516,076 Leasehold Improvements 333,529 225,722 Machinery and Equipment 405,233 143,661 Sign 43,594 43,594 Structural 1,017,359 - Vehicle 79,744 79,744 Total 2,685,023 1,072,585 Less: Accumulated Depreciation (336,243 ) (175,020 ) Property, Plant and Equipment - net $ 2,348,780 $ 897,565 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 Company valued the shares at $1,417,200 based on the closing price of the stock the day the transaction closed. 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 acquired Depreciation and amortization expense totaled $161,223 and $68,166 for the years ended December 31, 2018 and 2017, respectively. Depreciation and amortization expense total $161,223 and $68,166 for the years ended December 31, 2018 and 2017, respectively. |
NON-CURRENT ASSETS
NON-CURRENT ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NON-CURRENT ASSETS | NOTE 5 – NON-CURRENT ASSETS Other assets consisted of the following at December 31, 2018 and December 31, 2017: December 31, 2018 (Audited) December 31, 2017 (Audited) Construction Deposits $ - $ 50,800 Rent Deposits 22,032 38,206 Security Deposits $ 9,491 $ 9,491 Non-Current Assets $ 31,523 $ 98,497 |
CONVERTIBLE DEBT
CONVERTIBLE DEBT | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE DEBT | 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 are 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 2.63%, volatility ranging from 94.15% to 243.37%, trading prices ranging from $0.045 per share to $0.41 per share and a conversion price ranging from $0.03 per share to $0.10 per share. The total derivative liabilities associated with these notes were $13,270,646 and $30,343,609 at December 31, 2018 and 2017, respectively. See Below Summary Table Convertible Debt Summary Debt Type Debt Classification Interest Rate Due Date Ending CT LT 12.31.18 12.31.17 A Convertible X 10.0% 1-Jan-17 25,000 $ 25,000 B Convertible X 8.0% 1-Jan-19 65,700 65,700 C Convertible X 8.0% 1-Jan-19 32,850 32,850 D Convertible X 8.0% 1-Jan-19 209,047 209,047 O Convertible X 8.0% 1-Jan-19 109,167 109,167 P Convertible X 8.0% 1-Jan-19 52,767 52,767 Q Convertible X 8.0% 1-Jan-19 52,050 52,050 R Convertible X 8.0% Converted - 203,867 S Convertible X 8.0% 1-Jan-19 50,400 50,400 T Convertible X 8.0% 1-Jan-19 250,000 250,000 V Convertible X 8.0% Converted - 25,000 W Convertible X 8.0% Converted - 15,000 X Convertible X 8.0% 1-Jan-19 66,800 60,000 BB Convertible X 10.0% 1-Jan-19 50,000 50,000 CC Convertible X 10.0% 1-Jan-19 100,000 100,000 EE Convertible X 0.0% 31-Dec-21 500,000 500,000 KK Convertible X 8.0% 1-Jan-19 150,000 150,000 LL Convertible X 8.0% 1-Jan-19 600,000 600,000 MM Convertible X 8.0% 1-Jan-19 100,000 100,000 NN Convertible X 8.0% 1-Jan-19 500,000 500,000 OO Convertible X 8.0% 1-Jan-19 500,000 500,000 PP Convertible X 8.0% 1-Jan-20 500,000 500,000 QQ Convertible X 8.0% 1-Jan-20 150,000 150,000 RR Convertible X 8.0% 1-Jan-20 500,000 500,000 SS Convertible X 8.0% 1-Jan-20 150,000 150,000 TT Convertible X 8.0% 1-Jan-20 300,000 - UU Convertible X 8.0% 1-Jan-20 150,000 - VV Convertible X 5.0% 1-Jan-20 100,333 80,000 XX Convertible X 8.0% 1-Jan-20 100,000 - YY Convertible X 8.0% 1-Jan-20 155,000 - ZZ Convertible X 8.0% 1-Jan-20 150,000 - AAA Convertible X 8.0% 1-Jan-20 95,000 - BBB Convertible X 8.0% 1-Jan-20 80,000 - CCC Convertible X 8.0% 1-Jan-20 25,000 - Total Convertible Debt 5,869,114 5,030,848 Less: Discount (1,191,263 (2,620,642) Convertible Debt, Net of Discounts $ 4,677,851 $ 2,410,206 Convertible Debt, Net of Discounts, Current $ 2,894,294 $ 855,000 Convertible Debt, Net of Discounts, Long-term $ 1,783,557 $ 1,555,206 FOOTNOTES FOR CONVERTIBLE DEBT SUMMARY TABLE (1) (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 are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have 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 0.18% to 2.63%, volatility ranging from 94.15% to 243.37%, trading prices ranging from $0.065 per share to $0.45 per share and a conversion price ranging from $0.05 per share to $0.41 per share. The balance of the convertible note at December 31, 2018 including accrued interest and net of the discount amounted to $48,716. A recap of the balance of outstanding convertible debt at December 31, 2018 is as follows: Principal balance $ 25,000 Accrued interest 23,716 Balance maturing for the period ending: December 31, 2018 $ 48,716 The Company valued the derivative liabilities at December 31, 2018 at $21,862. The Company recognized a change in the fair value of derivative liabilities for the year ended December 31, 2018 of $(2,523) which were charged (credited) to operations. In determining the indicated values at December 31, 2018, since the debt is in default, the company used the maximum value these embedded options represent, with a trading price of $0.11, and conversion prices of $0.09 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 are initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have 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 0.05% to 2.59%, volatility ranging from 94.15% to 243.23%, trading prices ranging from $0.065 per share to $0.14 per share and a conversion price ranging from $0.03 per share to $0.04 per share. The derivative liability associated with this note as of December 31, 2018 and 2017 were $1,038,039 and $2,706,447, respectively. (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 $0.03 per share. Note is Due in January of 2019. 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 0.41% to 2.59%, volatility ranging from 94.15% to 157.47%, trading prices ranging from $0.07 per share to $0.27 per share and a conversion price of $0.03 per share. The accrual interest associated with this note as of December 31, 2018 was $17,594. The derivative liability associated with this note as of December 31, 2018 and 2017 were $368,402 and $961,155, respectively. (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 $0.03 per share. Note is Due in January of 2019. 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 0.41% to 2.59%, volatility ranging from 94.15% to 157.47%, trading prices ranging from $0.07 per share to $0.27 per share and a conversion price of $0.03 per share. The accrual interest associated with this note as of December 31, 2018 was $8,504. The derivative liability associated with this note as of December 31, 2018 and 2017 were $178,071 and $464,583, respectively. (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 $0.03 per share. Note is Due in January of 2019. 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 0.41% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.07 per share to $0.27 per share a conversion price of $0.03 per share. The accrual interest associated with this note as of December 31, 2018 was $8,389. The derivative liability associated with this note as of December 31, 2018 and 2017 were $175,652 and $458,273, respectively. (R) On November 3, 2016 the Company received $200,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest is convertible into common shares at $0.03 per share. Note is Due in January of 2019 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 0.81% to 2.56%, volatility ranging from 126.29% to 154.71%, trading prices ranging from $0.10 per share to $0.27 per share a conversion price of $0.03 per share. The Note and Interest was converted to common shares on September 16, 2018. The derivative liability associated with this note as of December 31, 2018 and 2017 were $-0- and $1,794,939, respectively. (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 $0.03 per share. Note is Due in January of 2019 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 0.85% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.14 per share to $0.27 per share and a conversion price of $0.03 per share. The accrual interest associated with this note as of December 31, 2018 was $8,123. The derivative liability associated with this note as of December 31, 2018 and 2017 were $170,084 and $443,745, respectively. (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 $0.03 per share. Note is Due in January of 2019. 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 1.08% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.11 per share to $0.27 per share and a conversion price of $0.04 per share. The accrual interest associated with this note as of December 31, 2018 was $40,402. The derivative liability associated with this note as of December 31, 2018 and 2017 were $843,993 and $1,597,089, respectively. (V) On September 13, 2016 the Company received $25,000 from the issuance of convertible debt. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.03 per share. Note is Due in January of 2018. 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 0.41% to 1.49%, volatility ranging from 134.12% to 154.71%, trading prices ranging from $0.07 per share to $0.27 per share a conversion price of $0.03 per share. The Note and Interest was converted to common shares on July 6, 2018. The derivative liability associated with this note as of December 31, 2018 and 2017 were $0 and and $142,717, respectively. (W) On October 16, 2016 the Company received $15,000 from the issuance of convertible debt. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.03 per share. Note is Due in January of 2018. 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 0.85% to 1.49%, volatility ranging from 129.92% to 154.71%, trading prices ranging from $0.12 per share to $0.27 per share and a conversion price of $0.03 per share. As of December 31, 2018 the note holder requested that the debt be converted to common stock. The Note and Interest was converted to common shares on July 6, 2018. The derivative liability associated with this note as of December 31, 2018 and 2017 were $0 and and $135,756, respectively. (X) On November 18, 2016 the Company received $60,000 from the issuance of convertible debt. Interest is stated at 10%. The Note and Interest is convertible into common shares at $0.03 per share. Note is Due in January of 2019. 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 0.85% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.08 per share to $0.27 per share and a conversion price of $0.03 per share. The accrual interest associated with this note as of December 31, 2018 was $6,684. The derivative liability associated with this note as of December 31, 2018 and 2017 were $213,567 and $538,856, respectively. (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 $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. The accrual interest associated with this note as of December 31, 2018 was $5,003. The derivative liability associated with this note as of December 31, 2018 and 2017 were $159,855 and $441,215, respectively. (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 is convertible after September 23, 2015 and is convertible into the Company’s common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. The accrual interest associated with this note as of December 31, 2018 was $10,006. The derivative liability associated with this note as of December 31, 2018 and 2017 were $319,711 and $882,436, respectively. (DD) 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, 2017 and is convertible into the Company's common stock at a conversion rate of $0.03 per share. The market value of the stock at the date when the debt becomes convertible was $0.078. The debt issued is a result of a financing transaction and contain a beneficial conversion feature. The derivative liability associated with this note as of December 31, 2018 and 2017 were $-0- and $227,501, respectively. (EE) (1) At December 31, 2013 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 there is no accrued interest or principal due until December 31, 2017. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of Kaya Holdings Inc., which if converted are subject to resale restrictions through December 31, 2015. The two-year note in the aggregate amount of $500,000 is convertible into the Company’s preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contain a beneficial conversion feature valued at $500,000 to be amortized over the life of the debt. Total amortization for the year ended December 31, 2018 and 2017 were $-0- and $201,092, respectively. On January 1, 2018 the holder of the note extended the due date until December 31, 2021. As of December 31, 2018, the balance of the debt was $500,000. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. The derivative liability associated with this note as of December 31, 2018 and 2017 were $2,183,530 and $5,401,445, respectively. (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 $0.04 per share. Note is Due in January of 2019. 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 0.85% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.11 per share to $0.27 per share and a conversion price of $0.04 per share. The accrual interest associated with this note as of December 31, 2018 was $24,074. The derivative liability associated with this note as of December 31, 2018 and 2017 were $505,910 and $957,269, respectively. (LL) On January 20, 2017, the Company received $600,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.07 per share. Note is Due in January of 2019. 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 0.85% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.11 per share to $0.31 per share. The accrual interest associated with this note as of December 31, 2018 was $94,164. The derivative liability associated with this note as of December 31, 2018 and 2017 were $2,017,445 and $1,985,839, respectively. (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 $0.07 per share. Note is Due in January of 2019. 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 0.87% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.11 per share to $0.31 per share. The accrual interest associated with this note as of December 31, 2018 was $15,450. The derivative liability associated with this note as of December 31, 2018 and 2017 were $335,530 and $330,222, respectively. (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 $0.10 per share. Note is Due in January of 2019. 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 0.87% to 2.59%, volatility ranging from 94.15% to 154.71%, trading prices ranging from $0.11 per share to $0.31 per share. The accrual interest associated with this note as of December 31, 2018 was $76,470. The derivative liability associated with this note as of December 31, 2018 and 2017 were $1,675,391 and $1,060,065, respectively. (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 $0.10 per share. Note is Due in January of 2019. 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 0.87% to 2.59%, volatility ranging from 94.15% to154.71%, trading prices ranging from $0.11 per share to $0.30 per share. The accrual interest associated with this note as of December 31, 2018 was $74,915. The derivative liability associated with this note as of December 31, 2018 and 2017 were $1,670,870 and $1,056,990, respectively. (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 $0.05 per share. Note is Due in January of 2020. 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 0.87% to 2.59%, volatility ranging from 94.15% to 139.70%, trading prices ranging from $0.11 per share to $0.27 per share. The accrual interest associated with this note as of December 31, 2018 was $66,137. The derivative liability associated with this note as of December 31, 2018 and 2017 were $1,685,826 and $2,517,262, respectively. (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 $0.05 per share. Note is Due in January of 2020. 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 0.87% to 2.63%, volatility ranging from 94.15% to 139.70%, trading prices ranging from $0.11 per share to $0.27 per share. The accrual interest associated with this note as of December 31, 2018 was $17,508. The derivative liability associated with this note as of December 31, 2018 and 2017 were $498,964 and $743,654, respectively. (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 $0.03 per share. Note is Due in January of 2020. 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 1.49% to 2.63%, volatility ranging from 94.15% to 138.23%, trading prices ranging from $0.11 per share to $0.27 per share. The accrual interest associated with this note as of December 31, 2018 was $46,804. The derivative liability associated with this note as of December 31, 2018 and 2017 were $1,628,794 and $4,249,584, respectively. (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 $0.03 per share. Note is Due in January of 2020. 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 1.49% to 2.63%, volatility ranging from 94.15% to 131.81%, trading prices ranging from $0.11 per share to $0.27 per share. The accrual interest associated with this note as of December 31, 2018 was $12,374. The derivative liability associated with this note as of December 31, 2018 and 2017 were $483,674 and $1,252,183, respectively. (TT) On February 5, 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 $0.03 per share. Note is Due in January of 2020. 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 1.49% to 2.63%, volatility ranging from 94.15% to 132.27%, trading prices ranging from $.05 per share to $0.49 per share. The accrual interest associated with this note as of December 31, 2018 was $21,633. The derivative liability associated with this note as of December 31, 2018 and 2017 were $958,065 and $-0-, respectively. (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 $0.03 per share. Note is Due in January of 2020. 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 1.49% to 2.63%, volatility ranging from 94.15% to 132.27%, trading prices ranging from $0.11 per share to $0.14 per share. The accrual interest associated with this note as of December 31, 2018 was $9,304. The derivative liability associated with this note as of December 31, 2018 and 2017 were $474,528 and $-0-, respectively. (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 $0.10 per share. Note is Due in January of 2020. 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 1.49% to 2.59%, volatility ranging from 94.15% to 132.27%, trading prices ranging from $0.11 per share to $0.14 per share. The accrual interest associated with this note as of December 31, 2018 was $4,604. The derivative liability associated with this note as of December 31, 2018 and 2017 were $313,881 and $-0-, respectively. (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 $0.03 per share. Note is Due in January of 2020. 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 1.82% to 2.63%, volatility from 94.15% to 127.07%, trading prices ranging from $0.11 per share to $0.16 per share. The accrual interest associated with this note as of December 31, 2018 was $4,734. The derivative liability associated with this note as of December 31, 2018 and 2017 were $311,978 and $-0-, respectively. (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 $0.03 per share. Note is Due in January of 2020. 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 2.48% to 2.81%, volatility from 94.15% to 126.88%, trading prices rang |
NON-CONVERTIBLE DEBT
NON-CONVERTIBLE DEBT | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NON-CONVERTIBLE DEBT | NOTE 7 – NON-CONVERTIBLE DEBT A-Non Related Party December 31, 2018 December 31, 2017 Note 3 -0- 26,313 Note 4 -0- 24,963 Note 5 9,312 13,506 Note 6 -0- -0- Total Non-Convertible Debt 9,312 64,782 (3) 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 2,371,187 paid and non-assessable shares of the Common Stock at the price of $0.0316297 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. (4) 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 2,371,187 paid and non-assessable shares of the Common Stock at the price of $0.0316297 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 9, 2018 has been fully repaid or the start of the Acceleration Period as defined in “The Note” or May 9, 2018 (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 December 31, 2018. (6) 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) due January 1, 2020 B-Related Party Loan payable - Stockholder, 0%, Due December 31, 2021 (1) $ 250,000 $ 250,000 $ 250,000 $ 250,000 (1) At December 31, 2013 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 there is no accrued interest or principal due until December 31, 2017. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of Kaya Holdings Inc., which if converted are subject to resale restrictions through December 31, 2015. The two-year note in the aggregate amount of $500,000 is convertible into the Company’s preferred stock at a conversion rate of $10.00 per share of preferred. At a conversion rate of 433.9297 common shares to 1 preferred share, this would result in a total of 21,696,485 common shares issued if all debt was converted. The market value of the stock at the date of issuance of the debt was $0.04. The debt issued is a result of a financing transaction and contain a beneficial conversion feature valued at $500,000 to be amortized over the life of the debt. Total amortization for the year ended December 31, 2017 was $201,092. On January 1, 2018 the holder of the note extended the due date until January 1, 2021. As of December 31, 2018, the balance of the debt was $500,000. The remaining $250,000 is not convertible. The company has imputed interest on both the convertible debt and the non-convertible debt. The company used an interest rate of 4% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. Summary Notes Payable Schedule-All Debt Balance December 31, 2017 $5,358,339 New Notes Payable 1,075,000 Addition due to amendment 7,133 Repaid Notes Payable (51,274) Conversions (260,774) Balance December 31, 2018 $6,128,424 |
STOCKHOLDERS EQUITY
STOCKHOLDERS EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
STOCKHOLDERS EQUITY | 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 433.9297 votes on any matters submitted to a vote of the stockholders of the Company and is entitled to dividends equal to the dividends of 433.9297 shares of common stock. Each share of Series C preferred stock is convertible at any time at the option of the holder into 433.9297 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. In February of 2018 the Company authorized the issuance of 6,200,000 shares of common shares of Kaya Holdings Inc. for employee compensation and consulting fees. The shares were valued at $942,400. As of December 31, 2018, all 6,200,000 shares were issued on July 6, 2018. In February of 2018, the Company authorized the issuance of 138,866 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. The restricted common shares were issued as payment of interest of $4,166. In February of 2018, the Company authorized the issuance of 277,766 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. The restricted common shares were issued as payment of interest of $8,333. In February of 2018, the Company authorized the issuance of 633,288 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. This was a conversion of a Note Payable and Interest with a total value of $28,498, the Note Payable was due January 1, 2019. In February of 2018, the Company authorized the issuance of 563,566 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor that is a current shareholder of the company. This was a conversion of a Notes Payable and Interest with a total value of $16,907 the Note Payable was due January 1, 2019. In June of 2018, the Company sold 500,000 shares of common stock for gross proceeds of $50,000. In May of 2018 the company filed a form S-8 this Registration Statement covers an additional 10,000,000 shares of common stock, par value $0.001 per share of Kaya Holdings, Inc. (the “Company”), which may be offered pursuant to the Company’s 2011 Stock Incentive Plan (the “Plan”), as amended on November 24, 2014, September 22, 2016 and May 1, 2018. In June of 2018, the Company authorized the issuance of 1,000,000 shares of common shares of Kaya Holdings Inc. for legal service. The shares were valued at $149,000. As of December 31, 2018, all shares were issued on July 6, 2018. In June of 2018 , the Company sold 50,000 shares of common stock for gross proceeds of $50,000. The shares were issued July 6, 2018. On July 6, 2018, the Company issued 1,805,555 shares of common shares of Kaya Holdings Inc. that previously recorded as stock payable in 2017 in satisfaction of promissory note due November 30, 2017 in the amount of $54,166, for principal and accrued but unpaid interest, which is convertible at $0.03 per share. In addition, the Company authorized 1,100,000 shares of Kaya Holdings Inc. for services at value of $163,810. As of December 31, 2018, 1,000,000 shares were unissued and valued at $65,000. In August of 2018, the Company sold 2,500,000 shares of common stock for gross proceeds of $250,000. As of September 30, 2018, all shares were issued on August 24, 2018. In August of 2018, the Company authorized the issuance of 100,000 shares of common stock of Kaya Holdings, Inc. for professional services valued at $11,810. The shares were issued August 24, 2018. In August of 2018, the Company issued total of 12,000,000 shares to acquire the OLCC licensed marijuana production and processing facility, consisting of the building and equipment. The shares were valued at $1,417,200 (See Note 11). In September of 2018, the Company authorized the issuance of 7,785,952 restricted common shares of Kaya Holdings, Inc. stock to an accredited investor of the company. This was a conversion of a Notes Payable and Interest with a total value of $233,579, the Note Payable was due January 1, 2019. As of December 31, 2018, the shares have not been issued by the transfer agent. In September of 2018 the Company authorized the issuance of 100,000 shares of common shares of Kaya Holdings Inc. for professional service. The shares were valued at $11,200 and the shares were issued on November 27, 2018. |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
DERIVATIVE LIABILITIES | NOTE 9 DERIVATIVE LIABILITIES The Company identified conversion features embedded within convertible debt and issued in 2013 and subsequent periods. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions. Additionally, due to a recognition of tainting, due to shares not being held in reserve in 2014 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 94.15% to 243.22%, trading prices ranging from $0.045 per share to $0.41 per share and a conversion price ranging from $0.03 per share to $0.10 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: Balance as of December 31, 2017 $ 30,343,609 Initial 4,524,958 Change in Derivative Values (13,900,712 ) Conversion of debt-reclass to APIC (1,184,821 ) Balance as of December 31, 2018 $ 19,783,034 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 recorded derivative liability expense of $3,370,329 and $18,377,623 for the years ended December 31, 2018 and 2017, respectively The Company recorded a change in the value of embedded derivative liabilities income/ (expense) of $13,900,712 and $8,221,485 for the years ended December 31, 2018 and 2017, respectively |
DEBT DISCOUNT
DEBT DISCOUNT | 12 Months Ended |
Dec. 31, 2018 | |
Summary of Investments, Other than Investments in Related Parties [Abstract] | |
DEBT DISCOUNT | 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 $1,191,263 as of December 31, 2018 and $2,620,342 as of December 31, 2017. The Company recorded $2,583,712 and $2,267,026 for the years ended December 31, 2018 and 2017, respectively for amortization of debt discount expense. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 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 2018, 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 2017 and 2018, 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 2017 and 2018, the Company issued stock grants to Craig Frank for 2,000,000 and 3,000,00 shares of KAYS stock respectively, 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. On August 24, 2018 the Company entered into a Consulting Agreement with Bruce Burwick and paid him 100,000 shares of KAYS stock via a stock grant from the 2011 Employee Stock Incentive Plan for services rendered to the Company through December 31. 2018. The stock wa valued by the Company at $11,810. 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 Company valued the shares at $1,417,200 based on the closing price of the stock the day the transaction closed. 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 acquired Depreciation and amortization expense totaled $161,223 and $68,166 for the years ended December 31, 2018 and 2017, respectively. |
STOCK OPTION PLAN
STOCK OPTION PLAN | 12 Months Ended |
Dec. 31, 2018 | |
Other Liabilities Disclosure [Abstract] | |
STOCK OPTION PLAN | 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. |
WARRANTS
WARRANTS | 12 Months Ended |
Dec. 31, 2018 | |
Warrants | |
WARRANTS | 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 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per 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, 2018, 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 3,161,583 paid and non-assessable shares of the Common Stock at the price of $0.0316297 per 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, 2018, 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 2,371,187 paid and non-assessable shares of the Common Stock at the price of $0.0316297 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 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, 2018, 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 2,371,187 paid and non-assessable shares of the Common Stock at the price of $0.0316297 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, 2018, the note was paid in full Warrants issued to Non-Employees Weighted Weighted Average Average Warrants Exercise Contract Issued Price Terms Years Balance as of December 31, 2017 11,065,540 0.0316297 4.8 Granted -0- -0- -0- Exercised -0- - - Expired -0- - - Balance as of December 31, 2018 11,065,540 0.0316297 3.8 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 14 – COMMITMENTS AND CONTINGENCIES The Company is, from time to time involved in litigation in the normal course of business. While it is not possible at this time to establish the ultimate amount of liability with respect to contingent liabilities, including those related to legal proceedings, management is of the opinion that the aggregate amount of any such liabilities, for which provision has not been made, will not have a material adverse effect on the Company’s financial position. Pleases see paragraphs below for results of legal proceedings during 2017 and 2018; there are no currently pending proceedings: A. On June 22, 2016, Daniel A. Goldin and Wally Goldin commenced an action in Oregon Circuit Court, Multnomah County, against the Company, MJAI, its direct majority-owned subsidiary, Craig Frank, our Chairman, President and Chief Executive Officer, William David Jones, a consultant to our Company and BMN Capital Group, LLC (the “ Action restricted The Company believed that not only was the Action without merit, but that it had various counterclaims against the plaintiffs, particularly Daniel L. Goldin. The Company defended against the Action and pursued its counterclaims both in the Action and in a separate lawsuit commenced against the plaintiffs in the U.S. District Court for the Southern District of Florida in which the Company alleged fraud by the plaintiffs and sought damages and the return of the common stock issued to the Company’s treasury In September 2017, the parties entered in a settlement agreement, pursuant to which Mr. Goldin waived any rights to a total of 1.2 million shares of KAYS stock (200,000 shares of our common stock which were already issued in his name and an additional 1,000,000 shares which were to be issued) and $40,000 in cash compensation payable to him under the employment agreement. The Company paid the plaintiffs the sum of $247,500, in exchange for the return of the stock and the waiver of claims against any further stock or cash, all litigation was dismissed by the parties and the parties exchanged mutual releases. In entering into the settlement agreement, the Company also took into consideration that legal fees and litigation costs incurred in proceeding further might very well exceed any judgment that would be awarded to the Company and the other defendants, and that even if a judgment were awarded, that there was significant doubt of the collectability of any such judgment from the Goldins. B. On February 9, 2018 KAYS submitted a site plan review for the Company’s envisioned 101,000 square foot OLCC licensed Kaya Farms™ 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 Letter of Completeness 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. 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 is now on a month-to-month basis. Effective May 15, 2014, the Company leased an unit in Portland, Oregon under a 5-year operating lease expiring May 15, 2019. 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. Year Ending December 31, Amount 2019 $ 249,775 2020 184,234 2021 79,337 2022 25,371 Thereafter — $ 538,737 Rent expense was $310,193 and $310,171 for the years ended December 31, 2018 and 2016, respectively. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Note 15- Income Taxes On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”), which significantly changed U.S. tax law. The Act lowered the Company’s U.S. tatutory federal income tax rate from 35% to 21% effective January 1, 2018, while also imposing a deemed repatriation tax on previously deferred foreign income. The Act also created a new minimum tax on certain future foreign earnings. The impact of the Act decreased the Company’s deferred tax asset related to the Company’s net operating loss by approximately $6,500,000 and decreased the Company’s valuation allowance by approximately $6,500,000 resulting in no impact to the Company’s financials. We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2018, and 2017 we have not recorded any uncertain tax positions in our financial statements. The effective US Federal Income Corporate Tax Rates for 2018 and 2017 are 21% and 35%, respectively. The Company has net operating loss carry forwards of approximately $7,240,687 at December 31, 2018 that expire beginning in 2026. However, utilization of these losses may be limited pursuant to Section 382 of the Internal Revenue Code due to a recapitalization in 2007 and subsequent stock issuances. The Company has a deferred tax asset as shown in the following: Year Ending December 31, 2018 Year Ending December 31, 2017 Deferred Tax Asset 1,520,544 1,544,462 Valuation Allowance -1,520,544 -1,544,462 Net Deferred Tax Asset $ — $ — |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 16 – SUBSEQUENT EVENTS May 2017 Financing Agreement Effective January 20, 2019 KAYS and the Institutional Investor further agreed to amend the May 2017 Financing Agreement 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. Since January 1, 2019 the Institutional Investor has purchased an additional $295,000 in principal amount of May 2017 Notes from the Company under the May 2017 Financing Agreement, as amended to date, of which are (i) convertible into shares of the Company’s common stock at a conversion price of $0.03; and (ii) secured by a mortgage lien on the Company’s 26 acre Lebanon, Oregon property (the “the $0.03 Secured Notes”). January 2018 Financing Agreement Additionally, in January 2019 the Agreement was further 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 Since January 1, 2019 the HNW Investor has purchased an additional aggregate of $50,000 in principal amount of the $0.03 Notes and has indicated he will purchase the remaining $150,000 of the $0.03 Notes. For more information on the Agreements relating to these issuances please refer to Item 5, Market for Registrant’s Common equity and Related Stockholder Matters, recent Sales of Unregistered Securities. 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. Note Conversion On March 5, 2019, a total of 7,785,952 shares of common stock were issued to Cayman Venture Capital Fund in consideration of settlement a total of $233,579 in principal and interest pursuant to a Note Conversion. The Note was reported as converted on September 16, 2018 when the documents were submitted but the shares were not issued until March 5, 2019. For more information see Footnote “R” to Convertible Debt Summary in Note 6 to the Financials. Future Employee Stock Plan Issuances and Director and Officer Restricted Stock issuances On December 28, 2018 KAYS informed she staff of the Kaya Shack Operations that they had been allocated a total of 2,050,000 shares of stock from the KAYS 2011 Employee Stock Plan (the “Plan”) for their service to the Company. The shares are subject to final approval of and confirmation by the Board of Directors to determine that the potential share issuances are valid according to the terms of the plan and other limitations, and will be reviewed at the next Board Meeting to be held prior to April 30, 2018. Pursuant to consulting agreements entered into on February 19, 2018 via Board Stipulation, BMN Consultants is scheduled to receive 3,000,000 shares of KAYS stock in Q-1 from the KAYS 2011 Employee Stock Plan (the “Plan”) for W. David Jones’s service to the Company during 2019. The shares are considered to be fully paid when issued. Pursuant to consulting agreements entered into on February 19, 2018 via Board Stipulation, Tudog Consultants is scheduled to receive 3,000,000 shares of KAYS restricted stock in Q-1 for Craig Frank’s service to the Company during 2019. The shares are considered to be fully paid when issued. Pursuant to annual compensation schedules, each of the three (3) Board Members is scheduled to receive 100,000 shares of KAYS restricted stock in Q-1 for their service to the Company during 2019. The shares are considered to be fully paid when issued. The above awards are all subject to final approval of and confirmation by the Board of Directors to determine that the potential share issuances are valid according to the terms of the plan and other qualifications and will be reviewed at the next Board Meeting to be held prior to April 30, 2018. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
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. |
Use of Estimates | 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 | 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 | Fiscal Year The Company’s fiscal year-end is December 31. |
Principles of Consolidation | 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: · Alternative Fuels Americas, Inc. (a Florida corporation) · 34225 Kowitz Road, LLC (an Oregon LLC) Majority-owned subsidiaries: · Marijuana Holdings Americas, Inc. (a Florida corporation) o MJAI Oregon 1 LLC o MJAI Oregon 2 LLC o MJAI Oregon 3 LLC o MJAI Oregon 4 LLC o MJAI Oregon 5 LLC |
Non-Controlling Interest | Non-Controlling Interest The company owns 55% of Marijuana Holdings Americas, Inc. |
Cash and Cash Equivalents | 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 Inventory consists of finished goods purchased, which are valued at the lower of cost or market value, with cost being determined on the first-in, first-out method. The Company periodically reviews historical sales activity to determine potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. Total Value of Finished goods inventory as of December 31, 2018 is $131,542 and $118,296 as of December 31, 2017. No allowance as necessary as of December 31, 2018 and 2017 |
Property and Equipment | 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 5-7 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. Real Property or Land is stated at cost and not depreciated. It is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount not be recoverable. |
Long-lived assets | 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. |
Operating Leases | 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 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 | 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 | 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 | Fair Value of Financial Instruments The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value: • Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. • Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. Fair Value Measurements at December 31, 2018 Level 1 Level 2 Level 3 Assets Cash $ 111,512 $ $ Total assets 111,512 - - Liabilities Convertible debentures, net of discounts of $1,191,264 - - 4,677,851 Short term debt, net of discounts of $-0- - 259,312 - Derivative liability - - 19,783,034 Total liabilities - 259,312 19,783,034 $ 111,512 $ (259,312) $ 24,460,885 Fair Value Measurements at December 31, 2017 Level 1 Level 2 Level 3 Assets Cash $ 318,462 $ $ Total assets 318,462 - - Liabilities Convertible debentures, net of discounts of $2,620,341 - - 2,410,206 Short term debt, net of discounts of $-0- - 314,782 - Derivative liability - - 30,343,609 Total liabilities - 314,782 32,753,815 $ 318,462 $ (314,782) $ (32,753,815) 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 | 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 | 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. |
Beneficial Conversion Feature | 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 | 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 | 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 | 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 | 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 | Stock-Based Compensation – Non Employees Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”). Pursuant to ASC Section 505-50-30, 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 (“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-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. Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services. Section 505-50-30 provides guidance on the determination of the measurement date for transactions that are within the scope of this Subtopic. Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a share option and similar instrument that the counterparty has the right to exercise expires unexercised. Pursuant to ASC paragraph 505-50-30-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded. |
Revenue Recognition | 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. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 – Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. The Company believes that there are no material changes or financial impact to the 2017 Financials based on the adoption of ASC 606 – Revenues from Contracts with Customers. 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 Cost of sales represents costs directly related to the purchase of goods and third party testing of the Company’s products. |
Related Parties | 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 | 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 | 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 periods ended December 31, 2018 and 2017. |
Subsequent Events | 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 | Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business Business Combinations (Topic 805) – Clarifying the Definition of a Business In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting Compensation—Stock Compensation Compensation—Stock Compensation (Topic 718)—Scope of Modification Accounting In February 2018, the FASB issued ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740) - Amendments to SEC Paragraphs Pursuant to SEC Staff 1986. The Company does not expect the In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which within those annual periods, In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION -Fair Value of Financial Instruments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Polices And Basis Of Presentation -fair Value Of Financial Instruments | |
Schedule of fair value of financial instruments | Fair Value Measurements at December 31, 2018 Level 1 Level 2 Level 3 Assets Cash $ 111,512 $ $ Total assets 111,512 - - Liabilities Convertible debentures, net of discounts of $1,191,264 - - 4,677,851 Short term debt, net of discounts of $-0- - 259,312 - Derivative liability - - 19,783,034 Total liabilities - 259,312 19,783,034 $ 111,512 $ (259,312) $ 24,460,885 Fair Value Measurements at December 31, 2017 Level 1 Level 2 Level 3 Assets Cash $ 318,462 $ $ Total assets 318,462 - - Liabilities Convertible debentures, net of discounts of $2,620,341 - - 2,410,206 Short term debt, net of discounts of $-0- - 314,782 - Derivative liability - - 30,343,609 Total liabilities - 314,782 32,753,815 $ 318,462 $ (314,782) $ (32,753,815) |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property Plant And Equipment | |
Schedule of property, plant and equipment | December 31, 2018 December 31, 2017 (Audited) (Audited) ATM Machine $ 11,000 $ 8,300 Computer 22,736 15,833 Furniture & Fixtures 49,408 39,655 HVAC 25,000 - Land 697,420 516,076 Leasehold Improvements 333,529 225,722 Machinery and Equipment 405,233 143,661 Sign 43,594 43,594 Structural 1,017,359 - Vehicle 79,744 79,744 Total 2,685,023 1,072,585 Less: Accumulated Depreciation (336,243 ) (175,020 ) Property, Plant and Equipment - net $ 2,348,780 $ 897,565 |
NON-CURRENT ASSETS (Tables)
NON-CURRENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Non-current Assets | |
Schedule of non current assets | December 31, 2018 (Audited) December 31, 2017 (Audited) Construction Deposits $ - $ 50,800 Rent Deposits 22,032 38,206 Security Deposits $ 9,491 $ 9,491 Non-Current Assets $ 31,523 $ 98,497 |
CONVERTIBLE DEBT (Tables)
CONVERTIBLE DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Debt | Convertible Debt Summary Debt Type Debt Classification Interest Rate Due Date Ending CT LT 12.31.18 12.31.17 A Convertible X 10.0% 1-Jan-17 25,000 $ 25,000 B Convertible X 8.0% 1-Jan-19 65,700 65,700 C Convertible X 8.0% 1-Jan-19 32,850 32,850 D Convertible X 8.0% 1-Jan-19 209,047 209,047 O Convertible X 8.0% 1-Jan-19 109,167 109,167 P Convertible X 8.0% 1-Jan-19 52,767 52,767 Q Convertible X 8.0% 1-Jan-19 52,050 52,050 R Convertible X 8.0% Converted - 203,867 S Convertible X 8.0% 1-Jan-19 50,400 50,400 T Convertible X 8.0% 1-Jan-19 250,000 250,000 V Convertible X 8.0% Converted - 25,000 W Convertible X 8.0% Converted - 15,000 X Convertible X 8.0% 1-Jan-19 66,800 60,000 BB Convertible X 10.0% 1-Jan-19 50,000 50,000 CC Convertible X 10.0% 1-Jan-19 100,000 100,000 EE Convertible X 0.0% 31-Dec-21 500,000 500,000 KK Convertible X 8.0% 1-Jan-19 150,000 150,000 LL Convertible X 8.0% 1-Jan-19 600,000 600,000 MM Convertible X 8.0% 1-Jan-19 100,000 100,000 NN Convertible X 8.0% 1-Jan-19 500,000 500,000 OO Convertible X 8.0% 1-Jan-19 500,000 500,000 PP Convertible X 8.0% 1-Jan-20 500,000 500,000 QQ Convertible X 8.0% 1-Jan-20 150,000 150,000 RR Convertible X 8.0% 1-Jan-20 500,000 500,000 SS Convertible X 8.0% 1-Jan-20 150,000 150,000 TT Convertible X 8.0% 1-Jan-20 300,000 - UU Convertible X 8.0% 1-Jan-20 150,000 - VV Convertible X 5.0% 1-Jan-20 100,333 80,000 XX Convertible X 8.0% 1-Jan-20 100,000 - YY Convertible X 8.0% 1-Jan-20 155,000 - ZZ Convertible X 8.0% 1-Jan-20 150,000 - AAA Convertible X 8.0% 1-Jan-20 95,000 - BBB Convertible X 8.0% 1-Jan-20 80,000 - CCC Convertible X 8.0% 1-Jan-20 25,000 - Total Convertible Debt 5,869,114 5,030,848 Less: Discount (1,191,263 (2,620,642) Convertible Debt, Net of Discounts $ 4,677,851 $ 2,410,206 Convertible Debt, Net of Discounts, Current $ 2,894,294 $ 855,000 Convertible Debt, Net of Discounts, Long-term $ 1,783,557 $ 1,555,206 A recap of the balance of outstanding convertible debt at December 31, 2018 is as follows: Principal balance $ 25,000 Accrued interest 23,716 Balance maturing for the period ending: December 31, 2018 $ 48,716 |
NON-CONVERTIBLE DEBT (Tables)
NON-CONVERTIBLE DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Non-convertible Debt | |
Non-related party | December 31, 2018 December 31, 2017 Note 3 -0- 26,313 Note 4 -0- 24,963 Note 5 9,312 13,506 Note 6 -0- -0- Total Non-Convertible Debt 9,312 64,782 |
Related Party | B-Related Party Loan payable - Stockholder, 0%, Due December 31, 2021 (1) $ 250,000 $ 250,000 $ 250,000 $ 250,000 |
Schedule of notes payable | Balance December 31, 2017 $5,358,339 New Notes Payable 1,075,000 Addition due to amendment 7,133 Repaid Notes Payable (51,274) Conversions (260,774) Balance December 31, 2018 $6,128,424 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Liabilities Tables | |
Derivative liabilities | Balance as of December 31, 2017 $ 30,343,609 Initial 4,524,958 Change in Derivative Values (13,900,712 ) Conversion of debt-reclass to APIC (1,184,821 ) Balance as of December 31, 2018 $ 19,783,034 |
WARRANTS (Tables)
WARRANTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Warrants Tables Abstract | |
Schedule of warrants | Warrants issued to Non-Employees Weighted Weighted Average Average Warrants Exercise Contract Issued Price Terms Years Balance as of December 31, 2017 11,065,540 0.0316297 4.8 Granted -0- -0- -0- Exercised -0- - - Expired -0- - - Balance as of December 31, 2018 11,065,540 0.0316297 3.8 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies | |
Schedule of commitments and contingencies | Year Ending December 31, Amount 2019 $ 249,775 2020 184,234 2021 79,337 2022 25,371 Thereafter — $ 538,737 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes Tables Abstract | |
Schedule of deferred tax assets | Year Ending December 31, 2018 Year Ending December 31, 2017 Deferred Tax Asset 1,520,544 1,544,462 Valuation Allowance -1,520,544 -1,544,462 Net Deferred Tax Asset $ — $ — |
LIQUIDITY AND GOING CONCERN (De
LIQUIDITY AND GOING CONCERN (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Net Loss | $ 4,747,297 | $ (15,090,593) |
Working Capital Deficiency | $ 23,651,967 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION -Fair Value of Financial Instruments (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Assets | |||
Cash | $ 111,512 | $ 318,462 | $ 306,884 |
Total Assets | 2,643,898 | 1,441,913 | |
Convertible debentures, net of discounts | 2,894,294 | 855,000 | |
Derivative liability | 19,783,034 | 30,343,609 | |
Total Liabilities | 25,949,119 | 33,844,322 | |
Fair Value, Inputs, Level 1 | |||
Assets | |||
Cash | 111,512 | 318,462 | |
Total Assets | 111,512 | 318,462 | |
Convertible debentures, net of discounts | |||
Short term debt, net of discounts | |||
Derivative liability | |||
Total Liabilities | |||
Fair Value, Inputs, Level 2 | |||
Assets | |||
Cash | |||
Total Assets | |||
Convertible debentures, net of discounts | |||
Short term debt, net of discounts | 259,312 | 314,782 | |
Derivative liability | |||
Total Liabilities | 259,312 | 314,782 | |
Fair Value, Inputs, Level 2 | |||
Assets | |||
Cash | |||
Total Assets | |||
Convertible debentures, net of discounts | 4,677,851 | 2,410,206 | |
Short term debt, net of discounts | |||
Derivative liability | 19,783,034 | 30,343,609 | |
Total Liabilities | $ 24,460,885 | $ 32,753,815 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property Plant And Equipment Details Abstract | ||
ATM Machine | $ 11,000 | $ 8,300 |
Computer | 22,736 | 15,833 |
Furniture & Fixtures | 49,408 | 39,655 |
HVAC | 25,000 | |
Land | 697,420 | 516,076 |
Leasehold Improvements | 333,529 | 225,722 |
Machinery and Equipment | 405,233 | 143,661 |
Sign | 43,594 | 43,594 |
Structural | 1,017,359 | |
Vehicle | 79,744 | 79,744 |
Total | 2,685,023 | 1,072,585 |
Less: Accumulated Depreciation | (336,243) | (175,020) |
Property, Plant and Equipment - net | $ 2,348,780 | $ 897,565 |
NON-CURRENT ASSETS (Details)
NON-CURRENT ASSETS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Noncurrent Assets Details Abstract | ||
Construction Deposits | $ 50,800 | |
Rent Deposits | 22,032 | 38,206 |
Security Deposits | 9,491 | 9,491 |
Non-Current Assets | $ 31,523 | $ 98,497 |
CONVERTIBLE DEBT - Convertible
CONVERTIBLE DEBT - Convertible Debt (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Convertible Debt - Convertible Debt | ||
Current Convertible Debt | $ 2,894,294 | $ 855,000 |
Long-Term Convertible Debt | 1,783,557 | 1,555,206 |
Total Convertible Debt | $ 4,677,851 | $ 2,410,206 |
CONVERTIBLE DEBT - Convertibl_2
CONVERTIBLE DEBT - Convertible Debt Summary (Details) | Dec. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
Principal balance | $ 25,000 |
Accrued interest | 23,716 |
Balance maturing | $ 48,716 |
NON-CONVERTIBLE DEBT (Details)
NON-CONVERTIBLE DEBT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Non-related party | $ 9,312 | $ 64,782 |
Note Payable 3 | ||
Non-related party | 0 | 26,313 |
Note Payable 4 | ||
Non-related party | 0 | 24,963 |
Note Payable 5 | ||
Non-related party | 9,312 | 13,506 |
Note Payable 6 | ||
Non-related party | $ 0 | $ 0 |
NOTES PAYABLE - Related party (
NOTES PAYABLE - Related party (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Notes Payable - Related Party Details | ||
Loan payable - related party , Due December 31, 2021 | $ 250,000 | $ 250,000 |
NOTES PAYABLE - Notes Payable (
NOTES PAYABLE - Notes Payable (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Notes Payable - Notes Payable | |
Balance December 31, 2017 | $ 5,358,339 |
New Notes Payable | 1,075,000 |
Addition due to amendment | 7,133 |
Repaid Notes Payable | (51,274) |
Conversions | (260,774) |
Balance December 31, 2018 | $ 6,128,424 |
DERIVATIVE LIABILITIES (Details
DERIVATIVE LIABILITIES (Details) | Dec. 31, 2018USD ($) |
Derivative Liabilities Details | |
Balance as of December 31, 2017 | $ 30,343,609 |
Initial | 4,524,958 |
Change in Derivative Values | (13,900,712) |
Conversion of debt-reclass to APIC | (1,184,821) |
Balance as of December 31, 2018 | $ 19,783,034 |
WARRANTS (Details)
WARRANTS (Details) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Warrants Details | |
Number of Warrants Outstanding, Beginning | shares | 11,065,540 |
Number of Warrants Outstanding, Ending | shares | 11,065,540 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning | $ / shares | $ 0.0316297 |
Weighted Average Exercise Price, Ending | $ / shares | $ 0.0316297 |
Weighted Average Contract Term Years | 4 years 9 months 18 days |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Commitments And Contingencies Details Abstract | |
2019 | $ 249,775 |
2020 | 184,234 |
2021 | 79,337 |
2022 | 25,371 |
Thereafter | |
Total | $ 538,737 |