Kaya 10K 2019 Annual report

	UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 Commission File No. 333-177532 KAYA HOLDINGS,INC. (Exact name of registrant as specified in its charter)
	Delaware	90-0898007
(State of other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

915 Middle River Drive, Suite 316

Ft. Lauderdale,Florida 33304

(Address of principal executive offices)

(954)-892-6911

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [X] No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or emerging growth company. See definition of “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

[ ] Large accelerated filer [ ] Accelerated filer

[X] Non-accelerated filer [X] Smaller reporting company

[X] emerging growth company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $8,366,235 as of June 28, 2019, based on the closing price on such date of $0.0651 of the Company’s common stock on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. There were 187,503,812 shares of common stock outstanding as of May 12, 2020.

DOCUMENTS INCORPORATED BY REFERENCE: No documents are incorporated by reference into this Annual Report on Form 10-K except those Exhibits so incorporated as set forth in the list of Exhibits set forth in Item 15 of this Annual Report on Form 10-K.

KAYA HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2019

TABLE OF CONTENTS

		Page
Part I
Item 1.	Business.	1
Item 1A.	Risk Factors.	68
Item 1B.	Unresolved Staff Comments.	75
Item 2.	Properties.	75
Item 3.	Legal Proceedings.	76

Part II
Item 5.	Market for Registrant’s Common Equity and Related Stockholder Matters.	78
Item 6.	Selected Financial Data.	80
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation.	80
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.	84
Item 8.	Financial Statements and Supplementary Data.	84
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	84
Item 9A.	Controls and Procedures.	84
Item 9B.	Other Information.	87

Part III
Item 10.	Directors, Executive Officers and Corporate Governance.	87
Item 11.	Executive Compensation.	88
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	90
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	91
Item 14.	Principal Accountant Fees and Services.	92

Part IV
Item 15.	Exhibits, Financial Statement Schedules.	93

Signatures		96

As used in this Annual Report on Form 10-K (the “Annual Report ”), the terms “KAYS ,” “the Company ,” “we,” “us ” and “our ” refer to Kaya Holdings, Inc. and its owned and controlled subsidiaries, unless the context indicates otherwise.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Information contained in this Annual Report contains “forward-looking statements ” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the ‘Exchange Act ”). These forward-looking statements are contained principally in the sectionstitled “Item 1. Business,” “Item 1A. Risk Factors,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and are generally identifiable by use of the words “may,” “will ,” “should ,” “expect,” “anticipate,” “estimate ,” “believe,” “intend” or “project” or the negative of these words or other variations on these words or comparable terminology.

The forward-looking statements herein represent our expectations, beliefs, plans, intentions or strategies concerning future events. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements.

Except as required by applicable laws, we undertake no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

PART I

Item 1. Business.

Overview

Kaya Holdings, Inc., “KAYS” or the “Company” a Delaware corporation, is a vertically integrated legal marijuana enterprise that produces, distributes, and/or sells a full range of premium cannabis products including flower, oils, vape cartridges and cannabis infused confections, baked goods and beverages through a fully integrated group of subsidiaries and companies supporting highly distinctive brands.

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

The Company’s business strategy seeks to achieve four fundamentals objectives:

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

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

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

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

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

Marijuana Holdings Americas, Inc.

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

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

The Company’s US operations are currently focused in Oregon, where all of the Company’s operations are licensed by the Oregon Liquor Control Commission (the “OLCC’), which has jurisdiction over legal medical and recreational cannabis grow, production and retail operations. The Company has three active OLCC Marijuana Retailer Licenses, each of which allow for one brick-and-mortar physical dispensary location as well as unlimited delivery operations tied to the geographic location of the fixed based licensed operations. KAYS currently operates two Kaya Shack™ retail outlets (one in South Salem and one in Portland), and is in the process of targeting its third license to operate a Kaya Farm Store and Delivery Hub to service the Southern Oregon Market.

The Company has developed its own proprietary Kaya Farms™ strains of cannabis, which it grows and produces (together with edibles and other cannabis products) at its 12,000 square foot Eugene, Oregon Sunstone Farms Indoor Cannabis Grow, Processing & Cannaceutical Facility which KAYS acquired in October 2018 and is presently conducting limited operations under a Management Agreement with Sunstone farms. Pending either transfer of the licenses by the OLCC to the Company, or through the eventual acquisition and transfer of other existing OLCC Marijuana Production and Processing licenses, KAYS intends to build out the facility and ramp up to full production.

Additionally, the Company also owns a 26-acre parcel in Lebanon, Linn County, Oregon, which it purchased in August 2017 on which it intends to construct a cannabis cultivation complex, which will initially consist of an 85,000-square foot Kaya Farms™ Greenhouse Grow and Production Facility. The Company has received county zoning approvals for the complex, and is currently awaiting OLCC Licensure approvals to begin construction of this facility.

Kaya Brands USA

Kaya Brands USA, Inc. (“KBUS”) was recently incorporated to manage and leverage the intellectual property associated with the Kaya family of brands and seek out US based projects and ventures to enhance shareholder value associated with their development.

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

Kaya Brands International and International Plans for Expansion

Kaya has recently implemented a strategic shift away from the U.S. cannabis market, its initial intended focus, placing all emphasis on international opportunities and brand extensions. Thus, KAYS has developed an exciting international growth program with the potential for strategic position and growth, all the while remaining prepared for the eventuality of a more inviting U.S. market.

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

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

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

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

Corporate Information

Our corporate office is located at 915 Middle River Drive, Suite 316, Fort Lauderdale, Florida, 33304. Our telephone number is 954-892-6911 and our corporate website is www.kayaholdings.com. Information contained on our corporate website does not constitute part of this Memorandum.

The Global Cannabis Industry

New Frontier Data estimates the existing global demand for cannabis to be $344.4 billion USD, using consumption levels and market prices to reach their estimate. The illicit market, with the exception of the relatively few countries that regulate and license cultivation or importation of cannabis, meets the vast majority of global demand for cannabis.

There are an estimated 263 million people globally who can be classified as cannabis consumers, demonstrating significant demand for the medical, wellness, and recreational uses of cannabis. The strength of demand varies by region and depends heavily on the status of legalization, levels of social acceptance, and access to cannabis. There are an estimated 1.2 billion people worldwide suffering from medical conditions for which cannabis has shown therapeutic value.

There are currently 55 countries with legalized cannabis for medical use. The regulatory framework varies by country and may differ in rules for qualifying conditions, physician participation, production and processing, accepted delivery systems, insurance payment participation, and potency permitted. The stringency of the rules typically has a significant impact on the size, growth, and reach of each program.

Canada and Uruguay are the first two nations with legal recreational cannabis, with a few other nations set to follow, including South Africa, Georgia and Mexico. The aim of the legal programs is to transition the illicit market to the legal, regulated and taxable markets. Canadian companies were the first to create global cannabis infrastructure and are poised to compete with other emerging export centers, including Israel, Greece and Colombia.

The United States has been the global leader in cannabis innovation, including new genetics, cultivation techniques, derivative products, and delivery methods. U.S. based companies are beginning to move into the global arena.

The opportunity represented by legal cannabis is significant, but many countries limit the number of legal participants and have regulatory policies that are still evolving, leading to high overall risk and barriers to entry.

As governments in newly legalized markets lay the foundations for their nascent industries, many lack or do not wish to regulate domestic cultivation and production activity. This forms the foundation for a vibrant international cannabis import-export sector.

North America

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

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

Canada

Canada is the first G-7 nation to fully legalize cannabis for medical and recreational use. The legal structure has given rise to large Canadian cannabis companies that have achieved high valuations, which they have leveraged to purchase supply chain companies and invest in infrastructure projects to produce cannabis at costs lower than those in Canada.

To date, Canadian companies report exporting only several thousands of pounds of cannabis to more than 20 different countries, collectively – demonstrating the early stage of development of the global cannabis market, and by extension the remaining opportunities.

The United States

New Frontier Data forecasts that the legal U.S. markets will generate nearly $13 billion in legal sales in 2019, growing to over $20 billion by 2022.

Cannabis remains federally illegal in the United States, even as support for legal recreational cannabis remains above 60% in most reputable polls. Regardless of the federal status of cannabis, currently 33 U.S. states have enacted laws legalizing some form of medical cannabis, and 10 states and the District of Colombia have legalized recreational use cannabis. The United States has been the global leader in cannabis innovation, including new genetics, cultivation techniques, derivative products, and delivery methods.

States with some type of legal medical cannabis laws include Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Illinois, Georgia, Indiana, Iowa, New Hampshire, Louisiana, Rhode Island, Minnesota, Missouri, Maryland, Montana, Michigan, New Mexico, New York, North Dakota, New Jersey, Ohio, Oklahoma, Vermont, Pennsylvania, Rhode Island, Texas, Utah, and West Virginia. States permitted the sales of recreational or “adult-use” cannabis are Alaska, California, Colorado, Illinois, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington. The District of Colombia (Washington D.C.) also permits adult-use cannabis.

Europe

New Frontier Data estimates the European cannabis market (legal & illicit) generates $69 billion USD annually, with France, Italy and Spain having the greatest number of cannabis consumers, and Germany with the most robust medical program to date.

There are almost 30 European countries that permit some form of legal medical cannabis including, France, Italy, Germany, United Kingdom, Spain, Poland, Czech Republic, Croatia, Cyprus, Denmark, Finland, Greece, Israel, Luxembourg, North Macedonia, Malta, Netherlands, Norway, Poland, Romania, Switzerland, Turkey, Ireland, Lithuania and Portugal. The European Union requires its member countries to enforce the European Union Good Manufacturing Practices (GMP), which detail the production standards for medicinal products. These standards are typically stringent and can be costly for cannabis companies.

Israel and Greece

Israel has a small population but a long established history of legal medical cannabis development. It continues as a leader with years in the development of cannabis pharmaceuticals, and together with Greece the 2 are projected to form a “Silicon Valley” network for the development of medical cannabis production to service the European Markets and beyond.

The Kaya™ Family of Brands

Currently Operational Brands (2014-2020)

Next Stage Traditional (2020-2021)

Next Stage Innovative (2020-2021)

Note: The “Next Stage Traditional” and “Next Stage Innovative” brands are all targeted for release over the 6-18 months. The Company is currently awaiting the status of the license transfer at the Kaya Farms Indoor Marijuana Grow, Processing & Cannaceutical Production Facility in Eugene, Oregon, and the pending license issuance of the Kaya Farms Ag Facility in Lebanon, Oregon to finalize the release dates for these brands in Oregon. In the event that the license transfer at the Eugene facility and/or the licensing approval and construction timeline of the Lebanon facility is delayed or experiences difficulties, the Company has sourced other alternatives to expedite the release of the brands and will update shareholders accordingly as to revised brand rollout dates (if any).

The Kaya Shack™ Brand

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

Additionally, Kaya Holdings maintains an active third OLCC Marijuana Retail License which it is seeking to move to its Eugene, Oregon Kaya Farms Indoor Production and Processing Facility so that the Company may offer a “Kaya Farm Store” and also serve as a retail delivery hub for Eugene, Oregon.

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

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

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

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

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

Kaya Shack™ Retail Outlets

All stores feature a check out stand wrapped to feature the Company’s proprietary brand of pre-rolls, Kaya Buddies. The Buddies program is an exciting and popular pre-roll offering, featuring a wide selection (15-15 strains of pre-rolls) and featuring our special Kaya Saying in each Buddies tube. A glass display case showcases at least 25 strains of marijuana flower, which the stores serve to customers “deli style”, weighing straight from the jar to the customer’s take-out tube. An additional display case with a varied selection of oils, concentrates and topicals rounds out the cannabis product display.

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

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

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

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

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

Kaya Shack™ Car Fleet and Home Delivery

The Company is licensed by the OLCC for home delivery for all three of its retail licenses and has a fleet of 4 Kaya Cars featuring the Company’s branding logos outfitted with safes and security equipment. We have begun to offer deliver within the geographic areas of Portland and Salem, and are looking to expand this offering to Eugene if we are able to get an approval on the transfer of our third retailer license and open up the Kaya Farm Store at our Eugene, Oregon Kaya Farms Indoor Grow, Processing & Cannaceutical Production Facility.

The Company has developed the website www.kayadelivers.com to advance the growth of its delivery service and to offer pre-ordering for curbside pickup in light of the coronavirus pandemic to better serve our customers.

We expect delivery to extend our visibility, assist in building brand awareness, and allow the Company to service a broader geographic territory.

Kaya Farms™

Lebanon, Linn County,Oregon Marijuana Grow and Manufacturing Complex

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

We filed for zoning and land use approval in early 2018, and after numerous regulatory challenges and delays, we finally received zoning and land use approval in early 2019 to build on the property. We are presently in the final planning stages and are awaiting the culmination of the OLCC licensing process to begin construction.

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

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

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

Kaya Farms Indoor Marijuana Grow, Processing & Cannaceutical Production Facility

On October 23, 2018 KAYS announced that it had concluded the purchase of the real property and associated equipment utilized by the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the OLCC for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles.

The purchase includes a 12,000 square foot building housing an 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 well as a substantial amount of manufactured extracts and related cannabis products.

The purchase price of $1.3 million for the OLCC licensed marijuana production and processing facility, consisting of the building and equipment was paid for by the issuance of 12 million shares of KAYS restricted stock to the seller at closing. The shares carry a lock-up-restriction that allows for their staged eligibility for resale over a 61-month period from the date of the purchase of the facility by KAYS. Additionally, the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with the Company. The proceeds from the sale of those shares were and are being used for acquisition related expenses, transitional operating costs and facility capital improvements with respect to the production and processing facility we purchased.

KAYS intends to utilize the processing facilities to grow their own top-shelf, connoisseur-grade marijuana flower, produce various brands of oils, edibles, concentrates

and extracts, and develop medical grade laboratory facilities for the production of a proprietary Kaya Cannaceuticals™ line of both CBD and CBD/THC products for the health, skincare and medical industries.

The Company is presently conducting limited grow and facility maintenance operations under a Management Agreement with Sunstone Farms, the current licensee. Pending either transfer of the licenses by the OLCC to the Company, or through the eventual acquisition and transfer of other existing OLCC Marijuana Production and Processing licenses, KAYS intends to build out the facility and ramp up to full production.

KAYS has initiated initial upgrades to the Eugene property, and pending successful resolution of the licensing associated with the facility intends to complete a full renovation and expansion to improve workflow and increase production capability.

Kaya Farms™ - Cannabis and Cannabis Products

Proprietary Cannabis Strains

Kaya Farms Proprietary Cannabis Concentrates

Concentrates & Extracts, Hash Oil

(Note: These Concentrates were produced under contract for Kaya Farms by a third party while we await licensure of Production Facilities)

Kaya Buddie™ Strain Specific Cannabis Cigarettes

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

Kaya Brands International

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

Canada

Canadian Franchising: KAYS has targeted Canada for its first international sale and operation of Kaya Shack™ cannabis store franchises. KAYS has entered into an area representation agreement with The Franchise Academy (a leading Canadian Franchise Development and Sales Group) to implement the Kaya Shack™ Retail Cannabis Store program in Canada (the only G7 country that has legalized both medical and recreational cannabis production, sale and use on a national level). The agreement targets 75-100 Kaya Shack™ Cannabis Retail locations throughout Canada through a multi-year structured rollout, subject to licensing and market conditions.

The Franchise Academy (http://www.franchiseacademy.ca) and its founder Shawn Saraga, is a member and national sponsor of the Canadian Franchise Association. With over 15 years of industry experience and having successfully closed over 700 franchise agreements and leases across Canada, the Franchise Academy has the knowledge, expertise, network and dedication to assist select franchisors enter the Canadian market.

Additionally, KAYS has retained Toronto, Canada based law firm of Garfinkle Biderman, LLP to prepare the Franchise Disclosure Documents and related items for the sale of Kaya Shack™ cannabis store franchises in Canada. We expect the franchise sale and placement effort throughout Canada to progress over the next 3-24 months. KAYS plans to ultimately expand its franchise operations to the U.S., as regulations and laws permit.

Greece

Kaya Kannabis is a joint venture project cultivation-for-export cannabis-farming project of Athens based Greekkannabis PC (“GKC”) and U.S. based Kaya Brands International, Inc (“KBI”), a majority owned subsidiary of Kaya Holdings, Inc. GKC is a recently formed Athens, Greece based cannabis company with deep ties in the Greek business community and a strong presence in the academic and agricultural communities. The alliance is designed to combine the business acumen and extensive European network of GKC with the broad cannabis industry and cannabis cultivation experience of Kaya Holdings.

On October 31, 2019 KAYS entered into an initial Memorandum of Understanding (“MOU”) setting forth an agreement in principle for KBI to acquire a 50% ownership interest in GKC. The MOU sets forth an agreement in principle, pursuant to which in consideration for KBI providing the necessary expertise related to cannabis cultivation, processing, brand development and other matters, KBI will have the right to acquire a 50% ownership interest in GKC by reimbursing GKC for 50% of its license application costs (with allowances for KBI’s expenses as well).

There are three licenses required for the Facility- an “Installation License” (which is the equivalent to a license to construct the facility), the “Operating License” (available only after construction is completed), and the “Production & Distribution License” (available from the EOF - the Greek equivalent to the U.S. FDA - once production can be evaluated).

Consummation of the transaction contemplated by the MOU is subject to, among other customary conditions, satisfactory completion by KBI of its due diligence review of GKC, the drafting, execution and delivery of definitive transaction documentation and final license approval and issuance by the Greek government.

Project Description

GKC has entered into an agreement to purchase 15 acres of land outside of Athens in Thebes, Greece, approximately 75 minutes from Athens plans to establish the Kaya Kannabis Cultivation and Processing Facility. The region offers optimal growing conditions for cannabis and will enable the Company to produce exceptional cannabis economically.

The project location provides:

15 acres of flat land, with additional land available.

Full exposure to sunlight, without shadows cast.

Access to sufficient water, with operating wells.

Access to sufficient electricity.

Access to logistic routes.

Proximity to sufficient work force, both professional & labor.

Easy to secure (for security & safety).

Zoned for cannabis production.

Land is completely cleared and ready for construction.

Project Management envisages twelve 35,000 sq. feet (approximately 3,500 sq. meters) of light deprivation greenhouses situated on fifteen acres of land, and supported by an additional 50,000 sq. feet (approximately 5,000 sq. meters) building for workspace, storage and administrative offices.

Under this model the farm will support 9,360 plants per greenhouse (for a total plant count of 112,320 plants per harvest). There will be four harvests each year for a total of 449,280 cannabis plants harvested annually. The Company estimates total farm production, once completely constructed and operating at full capacity, to be at a minimum of approximately 225,000 pounds of premium grade cannabis annually.

Current Licensing & Project Status

On February 18, 2020 the parties entered into an agreement to extend the date of the option until June 1, 2020 as GKC the first stage of the licensing had not yet been completed and the Parties due diligence process had not yet been completed.

On April 22, 2020 KAYS/KBI received confirmation from their Greek Counsel that the Greek Government had awarded the crucial Installation License for the project.

See the following pages for the initial MOU, the extension of the MOU and a copy of the Greek Licensing Document published by the Greek Government (along with a confirmation in English provided by the Athens based law firm of Dalakos Fassolis Theofanopoulos (https://dftlaw.gr/) who represents KAYS and KBI in Greece). The firm has developed a long established and well-respected commercial legal practice and has developed a wide international network of correspondent relationships with overseas law offices throughout the world.

Government Regulation

We are subject to general business regulations and laws, as well as regulations and laws directly applicable to our operations. As we continue to expand the scope of our operations, the application of existing laws and regulations could include matters such as pricing, advertising, consumer protection, quality of products, and intellectual property ownership. In addition, we will also be subject to new laws and regulations directly applicable to our activities.

Any existing or new legislation applicable to us could expose us to substantial liability, including significant expenses necessary to comply with such laws and regulations, which could hinder or prevent the growth of our business.

Federal, state and local laws and regulations governing legal recreational and medical marijuana use are broad in scope and are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws or allegations of such violations could disrupt our planned business and adversely affect our financial condition and results of operations. In addition, it is possible that additional or revised federal, state and local laws and regulations may be enacted in the future governing the legal marijuana industry. There can be no assurance that we will be able to comply with any such laws and regulations and its failure to do so could significantly harm our business, financial condition and results of operations.

Competition

The legal marijuana sector is rapidly growing and the Company faces significant competition in the operation of retail outlets, MMDs and grow facilities. Many of these competitors will have far greater experience, more extensive industry contacts and greater financial resources than the Company. There can be no assurance that we can adequately compete to succeed in our business plan.

Employees

As of the date as of this Report, our Oregon operations have a total of 12-15 part-time store employees including budtenders, trimmers, growers, and4 full-time employees, consisting of the Senior Vice President of Cannabis Operations, the Vice President of Marketing and Brand development, and 2 store managers. Additionally, we engage several consultants to assist with daily duties and business plan implementation and execution. Additional employees will be hired and other consultants engaged in the future as our business expands.

Item 1A. Risk Factors.

We have a limited operating history with our current business.

The Company was incorporated in 1993 and has engaged in a number of businesses as both a private and as a publicly held company, including the online sale of specialty foods, online marketing and website development.

KAYS’s legal marijuana business, which it has focused on since 2014, only commenced generating more than a limited level of revenues subsequent to the commencement of legal recreational marijuana sales in Oregon on October 1, 2015. Accordingly, our operations continue to be subject to all the problems, expenses, difficulties, complications and delays encountered in an early stage business. There can be no assurance that the Company will generate significant revenues or operate at a profit.

The Company will require additional financing to become commercially viable.

The Company’s current legal marijuana operations can be capital intensive.

During the years ended December 31, 2019 and 2018, we raised approximately $770,000 and $1,375,000, respectively, through a series of private debt and equity offerings to finance operations.

The Company incurred net income of $7,790,761 and of $4,747,297 or the years ended December 31, 2019 and 2018, respectively.

All of the net income for the years ended December 31, 2019 and December 31, 2018 were not actual operating gains but were a result of the derivative liabilities from the conversion of debt from the stabilization of our stock prices the reduces the volatility factors used in the derivative calculations.

At December 31, 2019, we had a total stockholders' deficit of $13,491,480 and a working capital deficiency of $9,844,132. There can be no assurance that the Company will become commercially viable without additional financing, the availability and terms of which are uncertain. If the Company cannot secure necessary capital when needed on commercially reasonable terms, its business, condition (financial and otherwise) and commercial viability may be harmed. Although management believes that it will be able to successfully execute its business plan, which includes third party financing and the raising of capital to meet the Company’s future liquidity needs, there can be no assurances in this regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern.

We currently rely on certain key individuals, and the loss of one of these key individuals could have an adverse effect on the Company.

Our success depends to a certain degree upon certain key members of our management and certain key consultants to the company. These individuals are a significant factor in our growth and success. The loss of the services of such members of management could have a material adverse effect on our Company.

The Company’s success will be dependent in part upon its ability to attract qualified personnel and consultants.

The Company’s success will be dependent in part upon its ability to attract qualified creative marketing, sales and development professionals. The inability to do so on favorable terms may harm the Company’s proposed business.

KAYS must effectively meet the challenges of managing expanding operations.

The Company’s business plan anticipates that operations will undergo expansion in 2019 and beyond. This expansion will require the Company manage a larger and more complex organization, which could place a significant strain on our managerial, operational and financial resources. Management may not succeed with these efforts. Failure to expand in an efficient manner could cause expenses to be greater than anticipated, revenues to grow more slowly than expected and could otherwise have an adverse effect on the business, financial condition and results of operations.

Marijuana remains illegal in the United States under federal law.

Notwithstanding its legalization for recreational and/or medical use by a growing number of states, the growing, transport, possession or selling of marijuana continues to be illegal under federal law. Although the Obama administration had made a policy decision to allow implementation of state laws legalizing recreational and/or medical marijuana use and not to federally prosecute anyone operating under state law, the continuance of that policy is not assured under the Trump administration and could change at any time, which might render our marijuana operations illegal and adversely affecting KAYS’s business, financial condition and results of operations.

The marketing and market acceptance of marijuana may not be as rapid as KAYS expects.

The market for legal marijuana is quickly evolving, and activity in the sector is expanding rapidly. Demand and market acceptance for legal marijuana are subject to uncertainty and risk, as changes in the price and possible adverse political efforts could influence and denigrate demand. KAYS cannot predict whether, or how fast, this market will grow or how long it can be sustained. If the market for legal marijuana develops more slowly than expected or becomes saturated with competitors, KAYS’s operating results could be adversely impacted.

KAYS’s marijuana activities are part of an emerging industry.

The Company intends to implement an aggressive plan of growth to enter the legal recreational and medical marijuana industry. The legal marijuana industry is new and emerging, and has yet to fully define competitive, operational, financial and other parameters for successful operations. By pursuing a growth strategy to enter a new and emerging industry, the Company’s operations may be adversely impacted as the industry’s competitive, operational, financial and other parameters take shape. Given the fluidity of the industry, the Company may make errors in implementing its business plan, thereby limiting some or all of its ability to perform in accordance with its expectations.

Our business could be affected by changes in governmental regulation.

Federal, state and local laws and regulations governing legal recreational and medical marijuana use are broad in scope and are subject to evolving interpretations, which could require us to incur substantial costs associated with compliance. In addition, violations of these laws or allegations of such violations could disrupt KAYS’s planned business and adversely affect our financial condition and results of operations. In addition, it is possible that additional or revised federal, state and local laws and regulations may be enacted in the future governing the legal marijuana industry. There can be no assurance that KAYS will be able to comply with any such laws and regulations and its failure to do so could significantly harm our business, financial condition and results of operations.

Our business will be subject to other operating risks which may adversely affect the Company’s financial condition.

Our planned operations will be subject to risks normally incidental to manufacturing operations which may result in work stoppages and/or damage to property. This may be caused by:

	·	breakdown of the equipment;
	·	labor disputes;

	·	imposition of new government regulations;
	·	sabotage by operational personnel;
	·	cost overruns; and
	·	fire, flood, or other acts of God.

We will likely face significant competition.

The legal marijuana industry is in its early stages and is attracting significant attention from both small and large entrants into the industry. KAYS expects to encounter significant competition as it implements its business strategy. The ability of KAYS to effectively compete could be hindered by a lack of funds, poor positioning, management error, and other factors. The inability to effectively compete could adversely affect our business, financial condition and results of operations.

Our internal controls may be inadequate, which could cause our financial reporting to be unreliable and lead to misinformation being disseminated to the public.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act `Rule 13a-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the principal executive and principal financial office and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

·		pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company

·		provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and/or directors of the Company; and

·		provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees. During the course of our testing, we may identity other deficiencies that we may not be able to timely remediate. In addition, if we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes Oxley”). Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock, if a market ever develops, could drop significantly

The Jumpstart our Business Startups Act of 2012 (the “Jobs Act”) has reduced the information that the Company is required to disclose.

Under the Jobs Act, the information that the Company will be required to disclose has been reduced in a number of ways.

As a company that had gross revenues of less than $1 billion during the Company’s last fiscal year, the Company is an “emerging growth company,” as defined in the Jobs Act (an “EGC ”). The Company will retain that status until the earliest of (a) the last day of the fiscal year which the Company has total annual gross revenues of $1,000,000,000 (as indexed for inflation in the manner set forth in the Jobs Act) or more; (b) the last day of the fiscal year of following the fifth anniversary of the date of the first sale of the common stock pursuant to an effective registration statement under the Securities Act; (c) the date on which the Company has, during the previous three year period, issued more than $1,000,000,000 in nonconvertible debt; or (d) the date on which the Company is deemed to be a “large accelerated filer ,” as defined in Rule 12b-2 under the Exchange Act or any successor thereto. As an EGC, the Company is relieved from the following:

The Company is excluded from Section 404(b) of Sarbanes-Oxley, which otherwise would have required the Company’s auditors to attest to and report on the Company’s internal control over financial reporting. The Jobs Act also amended Section 103(a)(3) of Sarbanes-Oxley to provide that (i) any new rules that may be adopted by the PCAOB requiring mandatory audit firm rotation or changes to the auditor’s report to include auditor discussion and analysis (each of which is currently under consideration by the PCAOB) shall not apply to an audit of an EGC; and (ii) any other future rules adopted by the PCAOB will not apply to the Company’s audits unless the SEC determines otherwise.

The Jobs Act amended Section 7(a) of the Securities Act to provide that the Company need not present more than two years of audited financial statements in an initial public offering registration statement and in any other registration statement, need not present selected financial data pursuant to Item 301 of Regulation S-K for any period prior to the earliest audited period presented in connection with such initial public offering. In addition, the Company is not required to comply with any new or revised financial accounting standard until such date as a private company (i.e., a company that is not an “issuer” as defined by Section 2(a) of Sarbanes-Oxley) is required to comply with such new or revised accounting standard. Corresponding changes have been made to the Exchange Act, which relates to periodic reporting requirements, which would be applicable if the Company were required to comply with them.

·	As long as the Company is an EGC, the Company may comply with Item 402 of Regulation S-K, which requires extensive quantitative and qualitative disclosure regarding executive compensation, by disclosing the more limited information required of a “smaller reporting company .”

·	In the event that the Company registers the common stock under the Exchange Act, the Jobs Act will also exempt the Company from the following additional compensationrelated disclosure provisions that were imposed on U.S. public companies pursuant to the Dodd-Frank Act:

	(i)	the advisory vote on executive compensation required by Section 14A(a) of the Exchange Act;

	(ii)	the requirements of Section 14A(b) of the Exchange Act relating to shareholder advisory notes on “golden parachute” compensation;

	(iii)	the requirements of Section 14(i) of the Exchange Act as to disclosure relating to the relationship between executive compensation and our financial performance; and

(iv)

the requirement of Section 953(b)(1) of the Dodd-Frank Act, which requires disclosureas to the relationship between the compensation of the Company’s chief executive officer and median employee pay.

The costs of being a public company could result in us being unable to continue as a going concern.

As a public company, we are required to comply with numerous financial reporting and legal requirements, including those pertaining to audits and internal control. The costs of this compliance could be significant. If our revenues do not increase and/or we cannot satisfy many of these costs through the issuance of our shares, we may be unable to satisfy these costs in the normal course of business that would result in our being unable to continue as a going concern.

Management and the Board of Directors may be indemnified.

The Certificate of Incorporation and Bylaws of KAYS provide for indemnification of directors and officers at the expense of the respective corporation and limit their liability. This may result in a major cost to the corporation and hurt the interests of stockholders because corporate resources may be expended for the benefit of directors and officers. The Company has been advised that, in the opinion of the Securities and Exchange Commission, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

The market for the KAYS Shares is extremely limited and sporadic

KAYS’s common stock is quoted on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. The market KAYS’s for common stock is limited and sporadic. Trading in stock quoted on the OTCQB is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of KAYS’s common stock for reasons unrelated to operating performance. Moreover, the trading of securities in the OTCQB is often more sporadic than the trading of securities listed on a quotation system like NASDAQ, or a stock exchange like the New York Stock Exchange.

KAYS’s common stock is a penny stock. Trading of KAYS’s common stock may be restricted by the penny stock regulations adopted by the Securities and Exchange Commission (the “SEC”) and FINRA’s sales practice requirements, which may limit a stockholder’s ability to buy and sell our common stock.

KAYS’s common stock is a penny stock. The SEC has adopted Rule 15g-9 which generally defines“penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. KAYS’s common stock is covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and accredited investors. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in, and limit the marketability of, KAYS’s common stock.

In addition to the penny stock rules promulgated by the SEC, FINRA (the Financial Industry Regulatory Authority) has adopted rules that require when recommending an investment to a customer, a broker- dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low -priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. FINRA’s requirements make it more difficult for broker-dealers to recommend that their customers buy KAYS’s common stock, which may limit investor ability to buy and sell KAYS’s common stock.

The market for penny stocks has experienced numerous frauds and abuses that could adversely impact KAYS’s common stock.

Company management believes that the market for penny stocks has suffered from patterns of fraud and abuse. Such patterns include:

control of the market for the security by one or a few broker-dealers that are often related to a promoter or issuer;

·		manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

·		boiler room practices involving high pressure sales tactics and unrealistic price projections by sales persons;

·		excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and

·		wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

The board of directors of KAYS has the authority, without stockholder approval, to issue preferred stock with terms that may not be beneficial to common stockholders and with the ability to adversely affect common stockholder voting power and rights upon liquidation.

KAYS’s Certificate of Incorporation allows us to issue shares of preferred stock without any vote or further action by our stockholders. Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders of preferred stock the rights to our assets upon liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

The ability of our principal stockholders, including our CEO, to control our business may limit or eliminate minority stockholders’ ability to influence corporate affairs.

The principal stockholder of KAYS holds 22,996,833 shares of common stock and 50,000 shares of Series C Convertible Stock. Additionally, our CEO owns 8,280,144 shares of common stock and 50,000 shares of Series C Convertible Preferred Stock. These preferred shares can be converted into a total of 43,329,970 shares of KAYS common stock which, added to the common shares of KAYS held by both parties gives them approximately 32.5% of votes on matters presented to stockholders. Accordingly, they are in a position to significantly influence membership of our board of directors as well as all other matters requiring stockholder approval. The interests of our principal stockholders may differ from the interests of other stockholders with respect to the issuance of shares, business transactions with or sales to other companies, selection of other officers and directors and other business decisions. The minority stockholders have no way of overriding decisions made by our principal stockholders. This level of control may also have an adverse impact on the market value of our shares because our principal stockholders may institute or undertake transactions, policies or programs that result in losses and/or may not take any steps to increase our visibility in the financial community and/or may sell sufficient numbers of shares to significantly decrease our price per share.

We do not expect to pay cash dividends in the foreseeable future.

KAYS has not paid cash dividends on its shares of common stock and does not intend to do so at any time in the foreseeable future. The future payment of dividends depends upon future earnings, capital requirements, financial requirements and other factors that the companies’ boards of directors will consider. Since they do not anticipate paying cash dividends on the common stock, return on investment, if any, will depend solely on an increase, if any, in the market value of the common stock.

The conversion of KAYS’ outstanding preferred stock by the CEO and convertible debt held by our principal stockholder would result in the issuance of43,329,970shares of KAYS’ common stock. Additionally, conversion of other convertible debt described in this Annual Report would result in further dilution to KAYS’ stockholders. Accordingly, such market overhang could adversely impact the market price of the common stock.

KAYS has 100,000 shares of Series C Convertible Preferred Stock outstanding, all of which are held by our CEO and our principal stockholder. These preferred shares can be converted into a total of 43,329,970 shares of KAYS common stock. Additionally, the company has other convertible debt described in this Annual Report, which would result in further dilution if converted Such market overhang could adversely impact the market price of KAYS’s common stock as a result of the dilution which would result if such securities were converted into shares of KAYS common stock.

Future sales of shares of KAYS common stock pursuant to Rule 144 under the Securities Act could adversely affect the market price of KAYS’s common stock.

KAYS has a substantial number of shares of common stock which were issued in transactions exempt from the registration requirements of the Securities Act and are now available for public sale pursuant to the Rule 144 under the Securities Act. Such sales could adversely affect the market price of KAYS’s common stock.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protection against interesteddirector transactions, conflicts of interest and similar matters.

Sarbanes-Oxley as well as rule changes proposed and enacted by the SEC, the NYSE/AMEX and the NASDAQ Stock Market as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities that are listed on those exchanges or the NASDAQ Stock Market. Because we are not currently required to comply with many of the corporate governance provisions and because we chose to avoid incurring the substantial additional costs associated with voluntary compliance, we have not yet adopted these measures.

We do not currently have independent audit or compensation committees. As a result, directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested- director transactions, conflicts of interest, if any, and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations as a result thereof.

We intend to comply with all corporate governance measures relating to director independence as and when required. However, we may find it very difficult or be unable to attract and retain qualified officers, directors and members of board committees required to provide for our effective management as a result of Sarbanes-Oxley. The enactment of Sarbanes-Oxley has resulted in a series of rules and regulations by the SEC that increase responsibilities and liabilities of directors and executive officers. The perceived increased personal risk associated with these recent changes may make it more costly or deter qualified individuals from accepting these roles.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Operating Leases

The Company has several operating leases- an office in Fort Lauderdale, Florida and 4 store leases in Oregon under arrangements classified as leases under ASC 842:

Effective June 12, 2017, the Company leased office space in Fort Lauderdale, Florida under a 5-year operating lease expiring June 30, 2022. The lease provides for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments of $4,017 and culminating in a monthly payment of $4,839. The total amount of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term of the lease. The lease was terminated on July 3, 2019 and the Company issued the landlord 500,000 shares of common stock as a settlement in lieu of a penalty for early termination.

Effective June 1, 2019, the Company leased its current office space in Fort Lauderdale, Florida under a 2-year operating lease expiring May 31, 2021. The rental payment is $1,802 per month. The total amount of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term of the lease.

Effective May 15, 2014, the Company leased an unit in Portland, Oregon under a 5-year operating lease expiring May 15, 2019. In May 2019, the lease had been extended to May 15, 2024. The lease provides for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments of $2,250 and culminating in a monthly payment of $2,632. The total amount of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term of the lease.

Effective June 1, 2015, the Company leased a 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.

Effective April 15, 2016, the Company leased a 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 Company is currently in process of negotiating a termination agreement with the landlord for this space as this store has been closed and the Company intends to utilize the OLCC License at its warehouse Property in Eugene, Oregon to open a “Grow Store” and Delivery Operation to service the Eugene, Oregon market (subject to OLCC approval for license transfer).

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 Company is currently in process of negotiating a termination agreement with the landlord for this landlord as this store has been closed

The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable. The Company used an estimated incremental borrowing rate of 9.32% to estimate the present value of the right of use liability.

The Company has right-of-use assets of $284,042 and operating lease liabilities of $288,899 as of December 31, 2019

Real Property

In August 2017, KAYS we acquired a 26 acre parcel in Lebanon, Linn County, Oregon, which we intend to develop as a Kaya Farms™ legal cannabis cultivation and manufacturing facility.

In 2018, we acquired the Eugene, Oregon based Sunstone Farms grow and manufacturing facility.

Item 3. Legal Proceedings.

From time to time KAYS be party to various legal proceedings in the ordinary course of business. Pleases see paragraphs below for results of legal proceedings during 2019 and 2020; there are no currently pending proceedings:

A. 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”) that the application was deemed complete and received an official letter of completeness with respect to the application. The formal “Letter of Completeness,” sent March 9, 2018 by a Linn County Senior Planner, confirmed the eligibility of the Company’s 26-acre plot for the purposes of growing legal cannabis, as well as the eligibility of the property for a special purpose exemption for the Company’s proposed manufacturing operations.

On April 20, 2018 the Company was notified by the Department that the site plan review for the indoor and outdoor marijuana operation on the 26.50-acre property (which encompasses approximately 86,000 square feet of the Company’s 101,000 square feet of the Company’s submitted buildings) had been approved. However, the conditional use permit for marijuana processing (which encompasses approximately 15,000 square feet of the Company’s 101,000 square feet of the Company’s submitted buildings) had been denied, largely due to the scale and coverage of the proposed processing operation. Additionally, local residents requested a hearing to appeal the approval of the site plan based on concerns that a portion of the approved site plan that supports the 36,000 square feet of green houses for outdoor growing is not eligible for the Irrigation rights that the Company possesses for the Property.

On June 12, 2018 the Linn County Planning Commission held a hearing and adopted a motion to Deny the previously approved site plan, citing that the proposed site plan does not comply with the odor and waste management standards set forth in Section 940.400 of the Linn County Development Code.

On August 7, 2018 KAYS filed a Notice of Appeal with the State of Oregon Land Use Board of Appeals (LUBA).

On October 9, 2018, Larkins Vacura Kayser LLP (“LVKLAW”), Oregon Counsel, received a letter from Linn County’s Attorney notifying them that Linn County did not intend to file a response brief or appear at the State of Oregon Land Use Board of Appeals (“LUBA”) hearing, and shortly thereafter LUBA cancelled the LUBA Hearing.

On November 13, 2018 LUBA issued its FINAL OPINION AND ORDER (the “Order”). The Order reversed the County’s decision and ordered the County to approve the Company’s Land Use Application for the to-be-built 85,000-square foot Kaya Farms & Greenhouse Facility in Lebanon, Oregon.

On August 16^th, 2019 the Land Use Board of Appeals issued an order granting attorney’s fees and costs in the amount of $25,158 be paid to KAYS and the funds were received in September, 2019. The proceeds were recorded net against costs incurred, noting no gain or loss.

B. On December 13, 2019 Siegelaub, Rosenberg, P.A. filed a suit against the Company in Broward County Court seeking payment of $6,000 together with costs, prejudgment interest and attorney’s fees for an unpaid invoice for work that it alleged was performed in preparation of the Company’s 2018 10-K (the “Siegelaub Claim”)

On March 28, 2020 the Company filed a response to the Siegelaub Claim which included a Counterclaim for Breach of Contract for the Plaintiff’s failure and refusal to perform its obligations and is seeking damages in an amount exceeding $30,000.

On April 20, 2020 the Parties reached a settlement in the matter and resolved the final accounting invoice for a payment of $1,500.00 with each Party responsible for their attorney’s fees and executing mutual releases.

C. As previously reported in our periodic reports filed under the Securities Exchange Act of 1934, in the fourth quarter of 2018, KAYS concluded the purchase of the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the Oregon Liquor Control Commission (the “OLCC ”) for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. The purchase included a 12,000 square foot building housing an 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 well as a substantial amount of manufactured extracts and related cannabis products. KAYS entered into a management agreement with the holder of existing OLCC licenses (“Sunstone ”) to oversee operations at the facility pending transfer of the license to KAYS, which were aware would be an extended and cumbersome process.

At all times since we began the transaction process and on an ongoing basis since the transaction was concluded, we have worked in close cooperation with the OLCC at each stage to both document the transaction, renew the existing licenses and transfer the licenses to us and submitted a substantial volume of paperwork to the OLCC with respect to the foregoing. We communicated with the OLCC on numerous occasions and requested guidance as to how to legally structure and complete the transfer of the licenses to us.

In November 2018, we were notified that that the OLCC was doing a Compliance Review, pending the requested transfer of the licenses (which is normal practice) and that they may have issues with how certain aspects of the transaction were structured. We asked the OLCC for guidance with respect to interim operation of the facility and were advised to continue operating as usual.

In February and March of 2019, the OLCC issued Conditional Letters of authority so that the facility could continue operations pending the resolution of the Sunstone License renewals and processing of the requested license transfers to KAYS.

Notwithstanding the foregoing, in mid-April 2019, we were advised by Sunstone that it had been notified that the OLCC was proposing that Sunstone’s licenses be cancelled, claiming that that Sunstone had not filed paperwork correctly with respect to the transaction or its historical ownership. A cursory review of the resolution of other sale-related compliance matters listed on the OLCC’s website shows that it is not atypical to for the OLCC to seek revocation of a license, but that often the settlement of that matter includes the sale and transfer of the license which, is what we are seeking. For the record, neither KAYS nor our Oregon OLCC licensed entities were named in OLCC action.

Sunstone’s attorney has filed a request for a hearing which we were initially advised by the OLCC could take over a year to occur and resolve due to the extensive number of licensing matters being processed. A hearing is currently set for August 4-5, 2020.

The Company notes that in a new and emerging regulatory environment for legal cannabis production and sale, licensing issues such as the present one periodically arise. In fact, as previously reported, the Company has encountered such issues in connection with its Portland, Oregon retail outlet and its planned Lebanon, Oregon grow and production operation, all of which were satisfactorily resolved in the Company’s favor. Accordingly, the Company is cooperating with Sunstone and the OLCC with respect to this matter and is optimistic that once the extensive record of paperwork submitted to and consultation with the OLCC has been reviewed, it will be able secure transfer of the OLCC licenses, either at the Administrative level via a settlement or hearing with the OLCC or subsequent litigation, or through the acquisition of another license and transfer to the Eugene, Oregon Warehouse location

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

Market for Common Stock

Our common stock is currently traded on the OTCQB tier of the over-the-counter market operated by OTC Markets Group, Inc. under the symbol “KAYS.” Such market is extremely limited. We can provide no assurance that our shares will be continued to be traded on the OTCQB or another exchange, or if traded, that the current public market will be sustainable.

Holders of Our Common Stock

As of May 7, 2020 we had 628 holders of record of our common stock. One of these holders is CEDE and Company which is the mechanism used for brokerage firms to hold securities in book entry form on behalf of their clients and as of May 7, 2020, they held 87,993,069 shares of common stock for these shareholders. When the Company last received a report from CEDE it showed a log of 10,340 shareholders that consented to release their name to the Company for purposes of shareholder communications. Accordingly, we believe that KAYS has approximately 10-11,000 beneficial stockholders as of such date.

Securities Authorized for Issuance under Equity Compensation Plans

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future insurance under equity compensations plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	0shares⁽¹⁾	n/a	10,905,000shares⁽¹⁾

Equity compensation plans not approved by security holders	0 shares	n/a	0 shares

(1)

Represents shares of common stock issued or reserved for issuance under our 2011 Incentive Stock Plan.

Recent Sales of Unregistered Securities

As detailed in the accompanying financial statements and footnotes, in 2019 KAYS issued a total of 3,305,732 shares of common stock to shareholders of theCompany for conversion of principal and interest due from convertible promissory notes.

In 2019 KAYS received a total of $565,000 from additional sales of Convertible Promissory Notes pursuant to the May 2017 FinancingAgreement and $130,000 from sales of Convertible Promissory Notes pursuant to the January 2018 Financing Agreement (each as described below).

Additionally, KAYS received $75,000 from stock subscriptions from accredited investors.

May 2017 Financing-Agreement

On May 11, 2017, we entered into a second financing agreement with the Institutional Investor to provide the Company with up to an additional $5.8 million in convertible note funding (the “May 2017 Notes \”) through July 31, 2018 (the “May 2017 Financing Agreement”). The May 2017 Financing Agreement was amended as of July 31, 2017, to increase the amount of funding available to the Company thereunder to $6.3 million and to extend the time period for such funding to May 31, 2019 and was subsequently amended as of November 15, 2017 and as of March 31, 2018, to further increase the amount of funding available to the Company thereunder to $7.75 million and to provide for the remaining $5.8million in principal amount of May 2017 Notes to be (a) convertible into shares of the Company’s common stock at conversion prices ranging from $0.03 to $0.11 pursuant to the terms of each May 2017 Note as described below; and (b) to extend the time period for such funding to April 30, 2020.

Pursuant to an additional agreement reached as of March 31, 2018, KAYS and the Institutional Investor agreed that effective as of January 1, 2019, (a) the maturity date of all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, will be extended from January 1, 2019 to January 1, 2020; (b) all of the $1.75 million in principal amount of May 2017 Notes currently outstanding and the remaining $5.8 million in principal amount of May 2017 Notes which may be issued under the Agreement, as amended, are to be secured by a mortgage lien on the Company’s 26-acre Lebanon, Oregon property, substantially similar in form and substance to the mortgage securing the $500,000 in principal amount of $0.03 Secured Notes purchased by the Institutional Investor, with the caveat that the property, improvements or rights to utilize them cannot be directly or indirectly leased, assigned or otherwise pledged to any entity without approval of the Institutional Investor, and in the event that there is a change in control of the Company or its subsidiaries the May 2017 Notes become immediately due and payable; and (c) the Institutional Investor was be granted piggy-back registration rights with respect to shares of the Company’s common stock it may hold or is issuable upon conversion of any Notes it or its Assigns may hold in the event the Company files a Registration Statement on Form S-1 with the Securities and Exchange Commission under the Securities Act of 1933, as amended to sell shares of its common stock or permit the resale by shareholders of previously issued shares of common stock, up to a maximum of 30% of the shares registered under such registration statement.

Effective as of January 20, 2019, the Agreement was further amended to: (a) extend the due dates for funding due under the Agreement for each of the remaining trenches (including the $420,000 remaining “$0.03” Notes that were due to expire December 31, 2018) by six (6) months; (b) agree to extend the maturity date all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, from January 1, 2020 to January 1, 2021; and (c) pursuant to price adjustment features in the outstanding Notes held by the Institutional Investor, the Company confirmed that all outstanding Notes with a conversion price greater than $0.03 held by the Institutional Investor would be lowered to $0.03 per share at time of conversion.

Effective as of January 1, 2020, the Agreement was further amended to: (a) extend the maturity date all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, from January 1, 2021 to January 1, 2024; (b) notwithstanding item “a” upon the Company receiving US$4,000,000.00 in new financing from sources other than the Holder, the Holder shall have the option to have the Company allocate 10% of any additional financing beyond this amount for purposes of early repayment of any Notes still held by the Holder; (c) notwithstanding item “a” provide for an “Acceleration Provision” in the event of a change in the event that Craig Frank is no longer the CEO of the Company, and/or W. David Jones is no longer retained to provide Business Consulting Services to the Company through BMN Consultants (either through resignation, termination or through determination by the Board of Directors that the respective party is medically incapable of conducting their duties), then the Holder of this Note is entitled to enact the Acceleration Provision by notifying the Company’s Board of Directors or Corporate Counsel which provides for the Maturity Date to be accelerated from January 1, 2024 to ninety (90) days from receipt of said notice; (d) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (e) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (f) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share amount.

As of the date of this Annual report, the Institutional Investor has purchased an aggregate of $2,970,000 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 “$0.03 Secured Notes”).

January 2018 Financing-Agreement

Effective January 22, 2018, and amended as of July 31, 2018 we entered into a financing agreement with a high net worth investor (the “HNW Investor”) to provide the Company with up to $1.4 million in convertible note funding (the “January 2018 Notes”) through July 31, 2018 (the “January 2018 Financing Agreement ”). Pursuant to the January 2018 Financing Agreement, upon execution of the January 2018 Financing Agreement, the HNW Investor purchased $100,000 in principal amount of January 2018 Notes, which are convertible into shares of the Company’s common stock at a conversion price of $0.10 per share (the“$0.10 Notes”).

While the January 2018 Financing Agreement granted the HNW Investor the right to acquire additional January 2018 Notes by certain deadlines if additional funding was provided, no additional $0.10 Notes were purchased until the January 2018 Financing Agreement was amended in December, 2018 to allow the HNW investor the right to purchase an additional $25,000 of January 2018 Notes, which are convertible into shares of the Company’s common stock at a conversion price of $0.05 per share (the“$0.05 Notes”).

In January 2019 the Agreement was 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”).

Effective as of January 1, 2020, the Agreement was further amended to: (a) extend the maturity date all then outstanding Company promissory notes held by the High Net Worth Investor Institutional Investor to January 1, 2021 (b) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (c) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (d) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share amount.

As of the date of this Annual report, the HNW Investor has purchased an aggregate of $270,000 in principal amount of the $0.03 Notes.

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.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

Year ended December 31, 2019 compared to year ended December 31, 2018

Revenues

We had revenues of $1,014,266 for the year ended December 31, 2019, as compared to revenues of $1,136,599 for the year ended December 31, 2018. Our revenues during 2019 were adversely impacted as a result of the temporary closing of our stores to reduce expenses and consolidate operations.

Cost of Sales

We had a cost of sales of $410,250 on revenues of $1,014,266 for the year ended December 31, 2019 versus a cost of sales of $494,088 on revenues of $1,136,599 for the year ended December 31, 2018

Operating Expenses

General and administrative were $932,553 for the year ended December 31, 2019, as compared to $883,138 for the year ended December 31, 2018. Salaries and wages were $505,049 for the year ended December 31, 2019 as compared to $574,107 for the year ended December 31, 2018. The decrease in these expense categories from 2018 to 2019, reflects our increased level of operations. Professional fees were $ 1,431,297 for the year ended December 31, 2019, as compared to $2,055,893 for the year ended December 31, 2018, reflecting a decrease of $624,596. After giving effect to all of the foregoing, total operating expenses were $2,868,899 for the year ended December 31, 2019, as compared to $3,513,138 for the year ended December 31, 2018. Accordingly, our operating loss was $2,264,883 for the year ended December 31, 2019, as compared to $2,870,627 for the year ended December 31, 2018.

Interest expense

Interest expense was $579,722 for the year ended December 31, 2019, as compared to $541,038 for the year ended December 31, 2018, reflecting an increase of additional debt incurred in 2019 to fund expansion of our operations.

Net Income (Loss)

After giving effect to an operating loss of $2,264,883, interest expense of $579,722, amortization of debt discount of $1,412,548, derivative liabilities expense of $634,741 and loss on extinguishment of debt of $25,000 offset by other income from a change in derivative liabilities income of $12,438,755 arising from the stabilization of our stock prices which reduced the volatility factors used in the derivative calculations, we had net loss from non-controlling interest of $282,264 for the year ended December 31, 2019. This compares to a net loss from non-controlling interest of $209,807 for the year ended December 31, 2018, after giving effect to an operating loss of $2,870,627, interest expense of $541,038, amortization of debt discount of $2,583,712, derivative liabilities expense of $3,370,329 offset by other income from a change in derivative liabilities income of $13,900,712 arising from the stabilization of our stock prices which reduced the volatility factors used in the derivative calculations. The net income attributable to the Company for 2019 and 2018 was $7,804,125 and $4,747,297, respectively.

Liquidity and Capital Resources

Overview

During 2019 our cash position decreased by $24,545 to $86,967 and our negative working capital decreased by $13,807,835 to $9,844,132.

As of December 31, 2019, our working capital consisted of cash of $86,967, inventories of $108,008 and prepaid expenses of $7,774.

Our current liabilities include accounts payable and accrued expenses of $1,108,452, accounts payable and accrued expenses-related parties of $7,733, accrued interest of $633,064, current portion of lease liability of $167,529, convertible notes payable- net of discount of $303,710, notes payable of $9,312 and derivative liabilities of $7,817,081.

The following table sets forth the major sources and uses of cash for the years ended December 31, 2019 and 2018:

	2019			2018
Net cash used in operating activities	$	774,877		$	1,331,574
Net cash used in investing activities	$	19,668		$	195,238
Net cash provided by financing activities	$	770,000			$1 ,319,862
Net (decrease) increase in cash	$	(24,545	)	$	(206,950	)

Cash Used in Operating Activities

During 2019, we used cash of $778,877 in operating activities, as compared to cash used in operations of $1,331,574 in 2018.

Cash Used in Investing Activities

During 2019, we used cash of $19,668 in investing activities, as compared to $195,238 in 2018. Expenditures in 2019 and 2018 consisted of property and equipment.

Cash Provided by Financing Activities

During 2019, $695,000 of convertible debt was issued and $75,000 of in capital contributions, as compared to $1,075,333 of convertible debt and $300,000 of restricted stock in 2018. The Company used $-0- and $55,471 to repay notes payable in 2019 and 2018, respectively.

Additional Capital

As of December 31, 2019, we had cash of $86,967 and a working capital deficiency of $9,844,132.

Management believes that it will require additional capital, in addition to anticipated revenues from operations to fund expansion of the Company’s operations and ultimately achieve profitability. The Company intends to seek such additional capital from further private offerings of equity and/or debt securities. However, we may not be successful in raising additional capital on commercially reasonable terms, if and when needed, in which case our business, financial condition, cash flows and results of operations may be materially and adversely affected.

Critical Accounting Estimates

The following are deemed to be the most significant accounting estimates affecting us and our results of operations:

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) identify 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.

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.

Fair value of financial instruments

The Company follows the provisions of ASC 820. This Topic defines fair value, establishes a measurement framework and expands disclosures about fair value measurements. We apply these provisions to estimate the fair value of our financial instruments including cash, accounts payable and accrued expenses, and notes payable.

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. Our 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.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (ASU 2016-02). Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, the Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients. On adoption, the Company recognized a right of use asset of $638,593, operating lease liabilities of $638,593, based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating lease. The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” to simply the accounting for certain instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Further, companies that provide earnings per share (“EPS”) data will adjust the basic EPS calculation for the effect of the feature when triggered and will also recognize the effect of the trigger within equity. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this new standard on January 1, 2019 and did not have a material impact on the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods within those There are no other recently issued accounting pronouncements that the Company has yet to adopt that are expected to have a material effect on its financial position, results of operations, or cash flows. fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for all entities, The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

See the Index of Consolidated Financial Statements on page F-1 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Termination of L & L CPAS, P.A.

(i) Effective December 11, 2018, we terminated L & L CPAS, P.A. (“ L & L ”), as our independent registered public accounting firm. The decision to terminate L & L was unanimously approved by the board of directors of KAYS on December 11, 2018.

(ii) The report of L & L for the fiscal years ended December31, 2017 and January 31, 2016, did not contain any adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles, except that such reports on the Company’s financial statements contained an explanatory paragraph in respect to the substantial doubt about its ability to continue as a going concern.

(iii )During the fiscal years ended December 31, 2017 and January 31, 2016, and the subsequent period through the date of termination (A) there have been no disagreements with L & L,whether or not resolved, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of L & L, would have caused L & L, to make reference to the subject matter of the disagreement in connection with their respective reports; (B) no such disagreement was discussed with the Company’s board of directors or any committee of the board of directors of the Company; and (C) there have been no “ reportable events ” as described in Item 304(a)(1)(v) of Regulation S-K.

Engagement of M&K CPAS, PLLC

(i) Effective December 11, 2018, KAYS engaged M&K CPAS, PLLC (“ M&K ”) as our independent public registered accounting firm. The engagement of M&K was approved by the Company’s board of directors on December 11, 2018.

(ii) During the Company’s two most recent fiscal years and any subsequent interim period prior to M&K’s engagement as the Company’s new independent registered public accounting firm , the Company did not consult with M&K regarding either (A) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements; or (B) any matter that was either the subject of a disagreement as defined in Item 304 of Regulation S-K or a “ reportable event ” as such term is described in Item 304

Disclosure controls and procedures

Under the direction of our Chairman and President, who is our principal, executive, financial and accounting officer, we evaluated our disclosure controls and procedures as of December 31, 2019. Our Chairman and President, who is our principal, executive, financial and accounting officer, concluded that our disclosure controls and procedures were not effective as of December 31, 2019.

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and President, who is our principal, executive, financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and President, who is our principal, executive, financial and accounting officer, , of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our fourth fiscal quarter covered by this report. Based on the foregoing, our Chairman and President concluded that our disclosure controls and procedures were not effective. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Management’s Report on Internal Control Over Financial Reporting

Our management of is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chairman and President, who is our principal, executive, financial and accounting officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

▪		Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

▪		Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

▪		Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s Chairman and President, who is our principal, executive, financial and accounting officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019. In making this assessment, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.

Based on the assessment performed, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has concluded that the Company’s internal control over financial reporting, as of December 31, 2019, is not effective to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of its financial statements in accordance with generally accepted accounting principles. Further, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has identified material weaknesses in internal control over financial reporting as of December 31, 2019.

Based on an evaluation, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, has concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of December 31, 2019 (the “Evaluation Date”), to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) accumulated and communicated to the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure. Each of the following is deemed a material weakness in our internal control over financial reporting:

▪		We do not have an audit committee. While we are not currently obligated to have an audit committee, including a member who is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management’s view that such a committee is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures.

▪		We did not maintain proper segregation of duties for the preparation of our financial statements. We currently have only one officer overseeing all transactions. This has resulted in several deficiencies, including the lack of control over preparation of financial statements and proper application of accounting policies

▪		Lack of controls over related party transactions: As of December 31, 2019, the Company did not establish a formal written policy for the approval, identification and authorization of related party transactions.

The Company’s Chairman and President, who is our principal, executive, financial and accounting officer, believes that the material weaknesses set forth in the two items above did not have an effect on our financial results. However, the Company’s Chairman and President, who is our principal, executive, financial and accounting officer, believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and financial procedures, which could result in a material misstatement in our consolidated financial statements in future periods.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls or in other factors that could affect these controls during the fourth quarter of the year ended December 31, 2019 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information

None

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers

Our directors and executive officers and their respective ages and titles are as follows:

Name	Age	Position(s) and Office(s) Held
Craig Frank	59	Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer, Director
Carrie Schwarz	60	Director
Jordi Arimany	60	Director
Bruce Burwick	71	Director

Set forth below is a brief description of the background and business experience of our directors and executive officers.

Craig Frankbecame Chairman of the Board, President, Chief Executive Officer and a Director of the Company in January 2010. He assumed the appointed position of acting Chief Financial Officer in 2012. For the past 15 years, Mr. Frank has served as Chairman and CEO of Tudog International Consulting, a Florida-based company with business advisory, business development, market research, training, and merchant banking divisions. During his tenure at Tudog, Mr. Frank has worked with more than 200 companies from 19 countries. In addition, in such capacity, he developed the business plan for a biofuels company based in Central America, and is the co-founder of the Company’s predecessor, which we acquired in January 2010. He remains Tudog’s Chairman. Mr. Frank is a widely published author with articles on business matters featured in magazines and newsletters internationally, including publications of the Guatemala America Chamber of Commerce, the Israel Export Institute, the Romania Chamber of Commerce, and the World Association of Small and Medium Sized Enterprises. He is also an in-demand speaker at international conferences, including the Florida Sterling Council, the International Project Management Association, The Central American Center for Entrepreneurship, the Israel Center for Entrepreneurial Studies, and the Pino Center for Entrepreneurship at Florida International University. The Company believes that Mr. Frank’s consulting and entrepreneurial experience brings significant value to our management team.

Carrie Schwarz, who became a director in January 2010, has served as the Managing Partner of Athena Assets Management, a New York based hedge fund specializing in investments of special situation publicly traded securities since 2002. Ms. Schwarz has also been a Portfolio Manager at Metropolitan Capital, a New York based hedge fund. From 1999 to 2001 Ms. Schwarz was an executive at Bank of America Securities, where she built and managed a proprietary Risk Arbitrage Department. From 1991 to 1999 she founded and managed Athena Investment Partners, L.P., a hedge fund that focused on special situations. Prior thereto, she was with American Porters, L.P., a hedge fund that focused on risk arbitrage, which she joined as a junior analyst in 1995 and ultimately rose to become Head of Research and a partner. Ms. Schwarz serves on the board of directors of the American Friends of the Weizmann Institute of Science. We believe that her financial industry experience makes her a valuable member of the board of directors.

Jordi Arimany, who became a director in January 2010, has served as Vice President of Business Development of First Diversity Management Group, a Cleveland, Ohio-based human capital services company since 2008. From 2007 to 2008 he served as Associate to the Executive Vice President of Bunco Industrial, in Guatemala City, one of the largest private banks in Central America. From 2000 to 2007 he was National Business Development Manager to LAFISE (Latin American Financial Services), a Miami, Florida-based financial services firm operating throughout Latin America. Mr. Arimany has a Bachelor’s degree in Business Administration from John Brown University and a Master’s degree in Business Administration from Regent University. We believe that his Latin American financial and business experience makes him a valuable member of the board of directors.

Bruce R. Burwick, who became a director in January 2019, has been a serial entrepreneur for over 50 years. His business ventures have included both domestic and international startups including product concept, manufacturing, wholesale and retail distribution, marketing and e-commerce. This includes private label manufacturing for several NYSE listed companies. In Oct 2015 Mr. Burwick sold Dynamic Health Laboratories, Inc to a NYSE listed company. Since 2014, has invested in both Medical and Recreational cannabis businesses.

Terms of Office

Our directors are appointed for a one-year term to hold office until the next annual meeting of our stockholders and until a successor is appointed and qualified, or until their removal, resignation, or death. Executive officers serve at the pleasure of the board of directors.

Board Committees

Two of our three directors are “independent” within the scope of the rules adopted by the NASDAQ Stock Market and the SEC: Ms. Schwarz and Mr. Arimany. However, our board of directors does not currently have an audit committee, a compensation committee, or a corporate governance committee. We plan to establish such committees in the near future.

Board of Directors Role in Risk Oversight

Members of the board of directors have periodic meetings with management and the Company’s independent auditors to perform risk oversight with respect to the Company’s internal control processes. Our board is currently comprised of a majority of independent directors. The Company believes that the board’s role in risk oversight does not materially affect the leadership structure of the Company.

Code of Ethics

We adopted a Code of Business Conduct and Ethics (“Ethics Code”) on February 28, 2013 that includes provisions ranging from conflicts of interest to compliance with all applicable laws and regulations. All officers, directors and employees are bound by this Ethics Code, violations of which may be reported to any independent member of the board of directors.

Item 11. Executive Compensation

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to our Chief Executive Officer and acting Chief Financial Officer, who is our sole executive officer, for 2019 and 2018.

SUMMARY COMPENSATION TABLE

Name and principal position

Year

Salary ($)

Bonus

($)

Stock

Awards

(#)

Option

Awards

(#)

Non-Equity

Incentive Plan

Compensation($)

Nonqualified

Deferred

Compensation Earnings ($)

All Other

Compensation

($)

Total ($)

Craig

Frank

CEO/Acting

CFO

2019

$300,000

3,000,000

$300,000

(1)

2018

$300,000

3,000,000

(2)

$300,000

(1)

Mr. Frank’s compensation for 2019 was total of $120,000.00 paid in cash and $180,000.00 in accrurals.

(2)

Represents “restricted ” shares of our common stock valued at $0.10 per share.

Mr. Frank's compensation was paid to Tudog International Consulting, Inc., of which Mr. Frank is the Chairman and a principal.

Employment and Consulting Agreements

The Company is currently not a party to any employment agreement with its executive officers. The Company has consulting agreements with Tudog International Consulting, of which firm Mr. Frank is Chairman and a Principal, for the services of Mr. Frank as CEO and acting CFO.

Outstanding Equity Awards at Fiscal Year-End

None.

Compensation of Directors Table

The table below summarizes all compensation paid to our nonemployee directors for 2018.

Name

Fees

Earned or

Paid in

Cash

Stock

Award

Option Awards

Nonequity

Incentive Plan

Compensation

Nonequity

Deferred

Compensation Earnings

All Other Compensations

Total

Carrie Schwarz

—

100,000⁽¹⁾

—

100,000

Jordi

Arimany

—

100,000⁽¹⁾

—

100,000

Bruce Burwick

—

100,000⁽¹⁾

—

100,000

⁽¹⁾Represents restricted shares of common stock granted.

Narrative Disclosure to the Director Compensation Table

Our non-employee directors are compensated with common stock. All such directors receive 100,000 “restricted” shares of common stock annually for their service.

2011 Incentive Stock Plan

Our 2011 Incentive Stock Plan, as amended (the “Plan”) provides for equity incentives to be granted to our 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 Plan, restricted stock awards, other stock- based awards, or any combination of the foregoing. The Plan is administered by the board of directors.

A total of 40,000,000 shares of KAYS common stock has been reserved for issuance under the Plan. As of December 31, 2019 awards covering 29,095,000 shares have been issued under the Plan and 10,095,000 shares of common stock were available for issuance under the Plan.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth the beneficial ownership of our common stock by each director and executive officer, by all directors and executivesofficers as a group and by each other person known by us to beneficially own 5% or more of our common stock as of the date of this Annual Report. The address of each such person is c/o the Company 915 Middle River Drive, Suite 316, Fort Lauderdale, FL, 33304.

Name and Address of Beneficial Owner and Directors and Executive officers:	Number of Shares of Common Stock	Percentage of shares (4)

Craig Frank (1)(2)	28,015,129	12.13%
Carrie Schwarz	500,000	*
Jordi Arimany	837,500	*
Bruce Burwick	14,700,000	6.36%
All directors and
executive officers,
as a group (three
persons) (1)(2)	44,052,629	19.08%
Other 5% or greater
stockholders:
Ilan Sarid (3)	44,661,818	19.34%%

* Less than 1%

includes shares beneficially owned by Tudog International Consulting and Drora Frank.

Includes 21,664,985 shares of common stock issuable upon conversion of 50,000 shares of our Series C Convertible Preferred Stock held by Mr. Frank, which shares vote on an “as converted” basis.

Includes 21,664,985 shares of our common stock issuable upon conversion of 50,000 shares of our Series C Convertible Preferred Stock held by Mr. Sarid, which shares vote on an “as converted” basis.

All values for “Percentage of Shares” owned were calculated by adding 43,329,970 (the amount of Common Shares issuable on the conversion of the outstanding 100,000 Series C Convertible shares) to the number of issued and outstanding shares.

The persons named above have full voting and investment power with respect to the shares indicated. Under the rules of the SEC, a person (or group of persons) is deemed to be a “beneficial owner” of a security if he or she, directly or indirectly, has or shares the power to vote or to direct the voting of such security, or the power to dispose of or to direct the disposition of such security. Accordingly, more than one person may be deemed to be a beneficial owner of the same security. A person is also deemed to be a beneficial owner of any security, which that person has the right to acquire within 60 days, such as options or warrants to purchase our common stock.

Securities Authorized for Issuance under Equity Compensation Plans

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future insurance under equity compensations plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders	0shares⁽¹⁾	n/a	10,905,000shares⁽¹⁾

Equity compensation plans not approved by security holders	0 shares	n/a	0 shares

⁽¹⁾Represents shares of common stock issued or reserved for issuance under our 2011 Incentive Stock Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

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.

On October 14, 2019 the shareholder submitted a conversion notice and the $500,000 in convertible debt was converted into 50,000 Series C Preferred shares of KAYS stock. The stock was issued from Treasury as restricted stock andcarries a minimum of one year restriction before it can be registered for resale pursuant to Rule 144.

At December 2017, the company was indebted to Craig Frank, Chairman, CEO and Acting CFO for KAYS, in the amount of $7,737 for travel and miscellaneous expenses incurred by Mr. Frank from travel and related activities in Oregon.

In each of 2018 and 2019, the Company issued stock grants to Jordi Arimany and Carrie Schwarz for 100,000 shares of KAYS stock for their service as board members. The stock was issued from Treasury as restricted stock and carries a one-year restriction before it can be registered for resale pursuant to Rule 144.

In 2018 and 2019, the Company issued stock grants to Craig Frank for 3,000,00 shares of KAYS stock each year, pursuant to his employment agreement via board resolution. The stock was issued from Treasury as restricted stock and carries a one year restriction before it can be registered for resale pursuant to Rule 144.

In August, 2018 KAYS entered into an agreement with Bruce Burwick, (who subsequently joined the Board of Directors and became an affiliate of the Company) to purchase the Eugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the OLCC for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. The purchase includes a 12,000 square foot building housing an indoor grow facility, as well as equipment for growing and extraction activity. KAYS paid Bruce Burwick $1,300,000.00 for the real property and schedule of equipment that was and is used to operate the facility.

In 2019, the Company issued a stock grant to Bruce Burwick for 100,000 shares of KAYS stock for his service as a board member. The stock was issued from Treasury as restricted stock and carries a one-year restriction before it can be registered for resale pursuant to Rule 144.

Additionally, the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with the Company. The proceeds from the sale of those shares were and are being used for acquisition related expenses, transitional operating costs and facility capital improvements with respect to the production and processing facility we purchased

On 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 was valued by the Company at $11,810.

For more information please see Related Party Transactions, Note 11 in the Financials.

Review, Approval and Ratification of Related Party Transactions

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions with our executive officers, directors and significant shareholders. However, all matters relating to the compensation and stock awards for such persons were approved by the board of directors prior to implementation.

Item 14. Principal Accountant Fees and Services.

Audit Fees

The following is a summary of the fees billed to us for professional services (a) for the year ended December 31, 2019 by M&K CPAS, PLLC our independent public registered accounting firm .

	2019		2018
Audit fees	$	58,000	$	58,000
Audit-related fees		-0-		-0-
Tax fees		-0-		-0-
All other fees		-0-		-0-
		58,000	$	58,000

Audit fees consist of billings for the audit of the Company’s consolidated financial statements included in our Annual Reports on Form 10-K and reviews of the consolidated financial statements included in the Company’s Quarterly Reports on Form 10-Q.

The Company does not have an Audit Committee. It is the Company’s policy to have its Chief Executive Officer preapprove all audit and permissible non-audit services provided by the independent public accountants, subject to approval by the Board of Directors.

These services may include audit, audit-related, tax and other services. Pre-approval is generally for up to one year, is detailed as to the particular service or category of services and is generally subject to a specific budget. Unless there are significant variations from the pre-approved services and fees, the independent public accountants and management generally are not required to formally report to the Board of Directors regarding actual services and related fees.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

a)		The following documents are filed as part of this Annual Report:

(1)		Financial Statements – The following Consolidated Financial Statements of the Company are contained inItem 8 of this Annual Report:

•		Reports of Independent Registered Public Accounting Firms

•		Consolidated Balance Sheets at December 31, 2019 and 2018

•		Consolidated Statements of Operations for the years ended December 31, 2019 and 2018

•		Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2019 and 2018

•		Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018

•		Notes to the Consolidated Financial Statements.

(2)		Financial Statement Schedules were omitted, as they are not required or are not applicable, or the required information is included in the Consolidated Financial Statements.

(3)		Exhibits – The following exhibits are filed with this report or are incorporated herein by reference to a prior filing, in accordance with Rule 12b32 under the Exchange Act:

Exhibit No.		Description of Exhibit
3.1		Certificate of Incorporation, as amended(1)(2)

3.2		Bylaws, as amended(1)

10.1		Share Exchange Agreement dated February 3, 2010 by and among Netspace International, Inc. and the shareholders of Alternative Fuels Americas, Inc. (1)
10.1

10.2		2011 Incentive Stock Plan, as amended(1) +

10.6		Form of 8% Convertible Promissory Note(1)

10.5		Consulting Agreement between Registrant and Tudog International Consulting, Inc^{. (1)} +

10.6		Office Lease for premises located at 305 South Andrews Avenue, Suite 209, Fort Lauderdale, FL 33301(3)

10.9		Letter Agreement effective December 1, 2011 between Registrant and Ilan Sarid(1)

10.10		Amendment to Consulting Agreement between Registrant and Tudog International Consulting, Inc.(1) +

10.11		Amendment to Consulting Agreement between Registration and The Tudog Group⁽³⁾+

21.1		Subsidiaries of Registrant(4)

23.1		Consent of M&K CPAS LLC⁽⁵⁾

23.2		Consent of L&L CPAS,P.A.⁽⁵⁾

31.1		Section 302 Certification⁽⁵⁾

32.1		Section 906 Certification⁽⁵⁾

(1)

Filed as an Exhibit to the Company’s Registration Statement on Form S-1, as amended (File No. 333-177532) and incorporated herein by reference.

(2)

Amendments to the Certificate of Incorporation are filed as Exhibits to the Company’s Current Reports on Form 8-K dated April 23, 2015 and March 22, 2017 and are incorporated herein by reference.

(3)

Filed as an Exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference.

(4)

Filed as an Exhibit to the Company’s annual Report on Form 10-K for the year ended December 31, 2017 and Incorporated herein by reference.

(5)

Filed herewith.

+ Management compensation arrangement.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: May 13, 2019

	KAYA HOLDINGS, INC.

	By:	/s/ Craig Frank
		Craig Frank
		Chairman of the Board, President, Chief Executive Officer, Acting Chief Financial Officer (Principal Executive, Financial and Accounting Officer

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, this Annual Report on Form 10K has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signature	Title	Date


/ s/ CraigFrank	Chairman of the Board, President, Chief Executive Officer,
Craig Frank	Acting Chief Financial Officer and Director (Principal Executive, Financial and Accounting Officer)	May 13, 2020



/s/ Carrie Schwarz	Director	May 13, 2020
Carrie Schwarz


/s/ Jordi Arimany	Director	May 13, 2020
Jordi Arimany

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Reports of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets at December 31, 2019 and 2018	F-2

Consolidated Statements of Operations for the Years Ended December 31, 2019 and 2018	F-3

Consolidated Statements of Cash Flows for the Years Ended December 31, 2019 and 2018	F-4

Consolidated Statements of Stockholders' Deficit Years Ended December 31, 2019 and 2018	F-5



Notes to Consolidated Financial Statements	F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Kaya Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Kaya Holdings, Inc. (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continues as a going concern. As discussed in Note 2 to the financial statements, in past years, the Company has suffered net losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are discussed in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

M&K CPAS, PLLC.

We have served as the Company’s auditor since 2018.

Houston, TX

May 13, 2020

F-1

Kaya Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

December 31,

ASSETS
	(Audited)			(Audited)
	December 31, 2019			December 31, 2018
CURRENT ASSETS:
Cash and equivalents	$	86,967		$	111,512
Inventory-net of allowance		108,008			131,542
Prepaid expenses		7,774			20,541
Total current assets		202,749			263,595

NON-CURRENT ASSETS:
Right-of-use asset - operating lease		284,042			—
Property and equipment, net		2,140,331			2,348,780
Deposits		27,523			31,523
Total other assets		2,451,896			2,380,303

Total assets	$	2,654,645		$	2,643,898


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

CURRENT LIABILITIES:
Accounts payable and accrued expense	$	1,108,452		$	562,016
Accounts payable and accrued expense-related parties		7,733			7,737
Accrued interest		633,064			659,169
Right-of-use liabiliy - operating lease		167,529			—
Convertible notes payable-net of discount		303,710			2,894,294
Notes payable		9,312			9,312
Derivative liabilities		7,817,081			19,783,034
Total current liabilities		10,046,881			23,915,562

LONG TERM LIABILITIES:
Convertible notes payable-related party-net of discount		250,000			500,000
Convertible notes payable-net of discount		5,727,874			1,283,557
Notes payable-related party		—			250,000
Right-of-use liabiliy - operating lease		121,370			—
Total long term liabilities		6,099,244			2,033,557

Total liabilities		16,146,125			25,949,119

STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, Series C, par value $.001; 10,000,000 shares authorized;
100,000 and 50,000 issued and outstanding at December 31, 2019 and December 31, 2018		100			50
, respectively
Common stock , par value $.001; 500,000,000 shares authorized;
187,503,812 shares issued as of December 31, 2019 and
165,812,128 shares issued as of December 31, 2018		187,504			165,812
Subscriptions payable		163,630			397,209
Additional paid in capital		19,603,854			17,100,137
Accumulated deficit		(32,120,787	)		(39,924,912	)
Non-controlling interest		(1,325,781	)		(1,043,517	)
Net stockholders' deficit		(13,491,480	)		(23,305,221	)

Total liabilities and stockholders' deficit	$	2,654,645		$	2,643,898

The accompanying notes are an integral part of these consolidated financial statements.

F-2

Kaya Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Audited)

	For the Year			For the Year
	Ended			Ended
	December 31, 2019			December 31, 2018

Net sales	$	1,014,266		$	1,136,599

Cost of sales		410,250			494,088

Gross profit		604,016			642,511

Operating expenses:
Professional fees		1,431,297			2,055,893
Salaries and wages		505,049			574,107
General and administrative		932,553			883,138
Total operating expenses		2,868,899			3,513,138

Operating loss		(2,264,883	)		(2,870,627	)

Other income(expense):
Interest expense		(579,722	)		(541,038	)
Amortization of debt discount		(1,412,548	)		(2,583,712	)
Derivative liabilities expense		(634,741	)		(3,370,329	)
Gain (loss) on extinguishment of debt		(25,000	)		—
Change in derivative liabilities expense		12,438,755			13,900,712
Other income (expense)		—			2,484
Total other income (expense)		9,786,744			7,408,117

Net income		7,521,861			4,537,490

Net (loss) attributed to non-controlling interest		(282,264	)		(209,807	)

Net income attributed to Kaya Holdings, Inc.		7,804,125			4,747,297

Basic net income per common share	$	0.04		$	0.03

Weighted average number of common shares outstanding - Basic		176,511,773			150,208,343

Diluted net income per common share	$	0.02		$	0.01

Weighted average number of common shares outstanding - Diluted		424,080,596			382,809,688

The accompanying notes are an integral part of these consolidated financial statements.

F-3

Kaya Holdings, Inc. and Subsidiaries

Consolidated Statement of Cashflows

(Audited)

	For the Year			For the Year
	Ended			Ended
	December 31, 2019			December 31, 2018
OPERATING ACTIVITIES:
Net income/(loss)	$	7,804,125		$	4,747,297
Adjustments to reconcile net loss to net cash used in operating activities:
Net income/(loss) attributable to non-controlling interest		(282,264	)		(209,807	)
Depreciation		228,117			161,223
Imputed interest		67,500			69,926
Loss (Gain) on Extinguishment of Debt		25,000			—
Derivative expense		634,741			3,370,329
Change in derivative liabilities		(12,438,755	)		(13,900,712	)
Amortization of debt discount		1,412,548			2,583,712
Stock to be issued for services - related parties		390,000			942,400
Stock to be issued for services		280,300			301,510
Changes in operating assets and liabilities:
Prepaid expense		12,767			(11,447	)
Inventory		23,534			(13,246	)
Right-of-use asset		354,551			—
Deposits		4,000			66,974
Accrued interest		512,222			397,471
Accounts payable and accrued expenses		546,431			162,796
Right-of-use liabilities		(349,694	)		—

Net cash used in operating activities		(774,877	)		(1,331,574	)

INVESTING ACTIVITIES:
Purchase of property and equipment		(19,668	)		(195,238	)
Net cash used in investing activities		(19,668	)		(195,238	)

FINANCING ACTIVITIES:
Proceeds from KBI Preferred Shares		75,000			—
Proceeds from Common stock subscription		—			300,000
Proceeds from convertible debt		695,000			1,075,333
Payments on notes payable		—			(55,471	)
Net cash provided by financing activities		770,000			1,319,862

NET INCREASE IN CASH		(24,545	)		(206,950	)

CASH BEGINNING BALANCE		111,512			318,462

CASH ENDING BALANCE	$	86,967		$	111,512

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid		—			—
Interest paid		—			—

NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING
AND FINANCING ACTIVITIES:
Reclassification of derivative liability to additional paid in capital		854,908			1,184,821
Adoption of lease standard ASC 842		638,593			—
Derivative liability on convertible note payable		692,969			1,154,629
Value of common shares issued for conversion of principal and interest		599,172			—
Value of common shares issued for conversion of convertible		233,579			—
notes payable issued from stock payable
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
Value of common shares issued as payment of interest		—			—
Capitalization of interest pursuant to amended agreement		505,955			—

The accompanying notes are an integral part of these consolidated financial statements.

F-4

Kaya Holdings, Inc. and Subsidiaries

Consolidated Statements of Stockholders' Deficit

For the years ended December 31, 2019 and 2018

(Audited)

						Additional Paid-in Capital	Accumulated Deficit	Noncontrolling Interest	Total Stockholders' Equity

					Subscription Payable
	Preferred Stock		Common Stock		Subscription Payable
	Shares	Amount	Shares	Amount	Amount

Balance, December 31, 2017	50,000	$ 50	138,993,087	$138,993	$ 152,796	$ 12,811,671	$ (44,672,209)	$ (833,710)	$ (32,402,409)

Imputed interest	-	-	-	-	-	69,926	-	-	69,926

Common stock issued pursuant to director compensation policy	-	-	6,200,000	6,200	-	936,200	-	-	942,400

Common stock issued for services	-	-	2,200,000	2,200	65,000	234,310	-	-	301,510

Common stock issued for cash	-	-	3,000,000	3,000	-	297,000	-	-	�� 300,000

Common stock to be issued for acquisition of fixed assets	-	-	12,000,000	12,000	-	1,405,200	-	-	1,417,200

Common stock issued for debt conversion and interest	-	-	3,419,041	3,419	179,413	161,009	-	-	343,841

Reclassification of derivative liability related to convertible notes	-	-	-	-	-	1,184,821	-	-	1,184,821

Net loss	-	-	-	-	-	-	4,747,297	(209,807)	4,537,490

Balance, December 31, 2018	50,000	$ 50	165,812,128	$165,812	$ 397,209	$ 17,100,137	$ (39,924,912)	$ (1,043,517)	$ (23,305,221)


Imputed interest	-	-	-	-	-	67,500	-	-	67,500

Loss on debt extinguishment	-	-	-	-	-	25,000	-	-	25,000

Common stock issued for services	-	-	4,600,000	4,600	-	275,700	-	-	280,300

Common stock issued for services - related parties	-	-	6,000,000	6,000	-	384,000	-	-	390,000

Common stock issued for debt conversion and interest	-	-	7,785,952	7,786	(233,579)	225,793	-	-	-

Common stock issued for notes conversion and interest	50,000	50	3,305,732	3,306	-	595,816	-	-	599,172

Cash from KBI Preferred Shares	-	-	-	-	-	75,000	-	-	75,000

Reclassification of derivative liabilities to additional paid in capital	-	-	-	-	-	�� 854,908	-	-	854,908

Net loss	-	-	-	-	-	-	7,804,125	(282,264)	7,521,861

Balance, December 31, 2019	100,000	$ 100	187,503,812	$187,504	$ 163,630	$ 19,603,854	$ (32,120,787)	$ (1,325,781)	$ (13,491,480)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

NOTE 1 – ORGANIZATION AND NATURE OF THE BUSINESS

Organization

Kaya Holdings, Inc. FKA (Alternative Fuels Americas, Inc.) is a holding company. The Company was incorporated in 1993 and has engaged in a number of businesses. Its name was changed on May 11, 2007 to NetSpace International Holdings, Inc. (a Delaware corporation) (“NetSpace”). NetSpace acquired 100% of Alternative Fuels Americas, Inc. (a Florida corporation) in January 2010 in a stock-for-member interest transaction and issued 6,567,247 shares of common stock and 100,000 shares of Series C convertible preferred stock to existing shareholders. Certificate of Amendment to the Certificate of Incorporation was filed in October 2010 changing the Company’s name from NetSpace International Holdings, Inc. to Alternative Fuels Americas, Inc. (a Delaware corporation). Certificate of Amendment to the Certificate of Incorporation was filed in March 2015 changing the Company’s name from Alternative Fuels Americas, Inc. (a Delaware corporation) to Kaya Holdings, Inc.

The Company has four subsidiaries: Alternative Fuels Americas, Inc, a Florida corporation, which is wholly-owned, Marijuana Holdings Americas, Inc., a Florida corporation (“MJAI”), which is majority-owned, 34225 Kowitz Road, LLC, a wholly-owned Oregon limited liability company which holds ownership of the Company’s 26 acre property in Lebanon, Oregon on which it plans to develop a legal cannabis cultivation and manufacturing facility, and Kaya Brand International, Inc. (KBI) a Florida Corporation which the Company owns 85% of which was formed on October 14, 2019 to expand the business overseas which the Company .

MJAI develops and operates the Company’s legal cannabis retail operations in Oregon through controlling ownership interests in five Oregon limited liability companies: MJAI Oregon 1 LLC, MJAI Oregon 2 LLC (inactive), MJAI Oregon 3 LLC (inactive) , MJAI Oregon 4 LLC (inactive) and MJAI Oregon 5 LLC.

MJAI Oregon 1 LLC is the entity that holds the licenses for the Company’s retail store operations and pending OLCC Production and Processing license transfer applications for the 260 Grimes Street property in Eugene, Oregon. MJAI Oregon 5 LLC maintains the Company’s pending OLCC Producer Application for the Company’s 26 acre farm property in Lebanon Oregon

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.

F-6

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^TMoutlet (Kaya Shack^TM OLCC Marijuana Retailer License #4) a 3,100-square foot Kaya Shack^TM Marijuana Superstore in Central Salem, Oregon. After various construction and permitting delays, On April 12, 2018, the location opened for business with both recreational and medical sales.

On August 18, 2018, the Company had concluded the purchase of the Eugene, Oregon based Sunstone Farms manufacturing facility, which 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. The Company is presently seeking transfer of the Facility’s OLCC Marijuana Production and Processing Licenses from the Facility’s Prior Licensee, Sunstone Farms to MJAI Oregon 1, LLC which the OLCC has not yet approved. Pending the transfer or issuance of a new License to the Company’s Operating subsidiary, or the purchase of another existing OLCC License and its transfer for use at the Facility the Company has conducted only limited operations of the Facility pending resolution of the Licensing. For more information please see Part I, Item 3. Legal Proceedings of the 10-K.

In February, 2020 the Company renewed the OLCC Marijuana Retailer Licenses #1, 2 and 4 listed above and did not renew OLCC Marijuana Retailer License #3 and ceased operations at that location. Additionally, the Company is in the process of seeking to transfer OLCC License #4 to either its 12,000 square foot property in Eugene, Oregon to facilitate a delivery hub for Eugene, Oregon or other such location to make effective use of MJAI Retailer License #4.

NOTE 2 – LIQUIDITY AND GOING CONCERN

The Company’s consolidated financial statements as of December 31, 2019 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 $7,804,125 for the twelve months ended December 31, 2019 and a net income of $4,747,297 for the twelve months ended December 31, 2018. The increase in net income is due to the changes in derivative liabilities, the decrease in amortization of debt discount and derivative liabilities expense, as wells as the company continues to have operating losses. At December 31, 2019 the Company has a working capital deficiency of $9,844,132 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:

F-7

•

the sale of additional equity and debt securities,

•

alliances and/or partnerships with entities interested in and having the resources to support the further development of the Company’s business plan,

•

business transactions to assure continuation of the Company’s development and operations,

•

development of a unified brand and the pursuit of licenses to operate recreational and medical marijuana facilities under the branded name.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.

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.

F-8

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:

Kaya Brands International, Inc. (a Florida Corporation)

Marijuana Holdings Americas, Inc. (a Florida corporation)

MJAI Oregon 1 LLC

MJAI Oregon 2 LLC (inactive)

MJAI Oregon 3 LLC (inactive)

MJAI Oregon 4 LLC (inactive)

MJAI Oregon 5 LLC

Non-Controlling Interest

The company owned 55% of Marijuana Holdings Americas until September 30, 2019. Starting October 1, 2019, Kaya Holding, Inc. owns 65% of Marijuana Holdings Americas, Inc. As of December 31, 2019 Kaya owns 65% of Marijuana Holdings Americas, Inc.

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, 2019 is $108,008 and $131,542 as of December 31, 2018. No allowance as necessary as of December 31, 2019 and December 31, 2018.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation and is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Depreciation of property and equipment is provided utilizing the straight-line method over the estimated useful lives, ranging from 5-30 years of the respective assets. Expenditures for maintenance and repairs are charged to expense as incurred.

Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

F-9

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.

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.

F-10

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, 2019
		Level 1		Level 2			Level 3
Assets
Cash		$	86,967	$	—		$-
Total assets			86,967		—		-
Liabilities
Convertible debentures, net of discounts of $471,685			—		—		6,281,584
Short term debt, net of discounts of $-0-			—		—		-
Derivative liability			—		—		7,817,081
Total liabilities			—		—		14,098,665
		$	86,967	$	—		$(14,098,665)


	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 $1,191,263			—		—		4,677,851
Short term debt, net of discounts of $-0-			—		259,312		-
Derivative liability			—		—		19,783,034
Total liabilities			—		259,312		24,460,885
		$	111,512	$	(259,312	)	$(24,460,885)

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.

F-11

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of it financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses the Binomial option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

In July 2017, the FASB issued ASU 2017-11Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivative and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendment also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect.

Prior to this Update, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

The amendments in this Update revise the guidance for instruments with down round features in Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, which is considered in determining whether an equity-linked financial instrument qualifies for a scope exception from derivative accounting. An entity still is required to determine whether instruments would be classified in equity under the guidance in Subtopic 815-40 in determining whether they qualify for that scope exception. If they do qualify, freestanding instruments with down round features are no longer classified as liabilities and embedded conversion options with down round features are no longer bifurcated.

For entities that present EPS in accordance with Topic 260, and when the down round feature is included in an equity-classified freestanding financial instrument, the value of the effect of the down round feature is treated as a dividend when it is triggered and as a numerator adjustment in the basic EPS calculation. This reflects the occurrence of an economic transfer of value to the holder of the instrument, while alleviating the complexity and income statement volatility associated with fair value measurement on an ongoing basis. Convertible instruments are unaffected by the Topic 260 amendments in this Update.

F-12

The amendments in Part 1 of this Update are a cost savings relative to former accounting. This is because, assuming the required criteria for equity classification in Subtopic 815-40 are met, an entity that issued such an instrument no longer measures the instrument at fair value at each reporting period (in the case of warrants) or separately accounts for a bifurcated derivative (in the case of convertible instruments) on the basis of the existence of a down round feature. For convertible instruments with embedded conversion options that have down round features, applying specialized guidance such as the model for contingent beneficial conversion features rather than bifurcating an embedded derivative also reduces cost and complexity. Under that specialized guidance, the issuer recognizes the intrinsic value of the feature only when the feature becomes beneficial instead of bifurcating the conversion option and measuring it at fair value each reporting period.

The amendments in Part II of this Update replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. This has the benefit of improving the readability of the Codification and reducing the complexity associated with navigating the guidance in Topic 480.

The Company adopted this new standard on January 1, 2019; however, the Company needs to continue the derivative liabilities due to variable conversion price on some of the convertible instruments. As such, it did not have a material impact on the Company’s consolidated financial statements.

Beneficial Conversion Feature

For conventional convertible debt where the rate of conversion is below market value, the Company records a "beneficial conversion feature" ("BCF") and related debt discount.

When the Company records a BCF, the relative fair value of the BCF is recorded as a debt discount against the face amount of the respective debt instrument (offset to additional paid in capital) and amortized to interest expense over the life of the debt.

Debt Issue Costs and Debt Discount

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

Original Issue Discount

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The original issue discount would be recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the life of the debt.

Extinguishments of Liabilities

The Company accounts for extinguishments of liabilities in accordance with ASC 860-10 (formerly SFAS 140) “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. When the conditions are met for extinguishment accounting, the liabilities are derecognized and the gain or loss on the sale is recognized.

Stock-Based Compensation - Employees

The Company accounts for its stock-based compensation in which the Company obtains employee services in share-based payment transactions under the recognition and measurement principles of the fair value recognition provisions of section 718-10-30 of the FASB Accounting Standards Codification. Pursuant to paragraph 718-10-30-6 of the FASB Accounting Standards Codification, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.

The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the performance is complete or the date on which it is probable that performance will occur.

If the Company is a newly formed corporation or shares of the Company are thinly traded, the use of share prices established in the Company’s most recent private placement memorandum (based on sales to third parties) (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

F-13

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.

F-14

Stock-Based Compensation – Non Employees

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation: Improvement to Nonemployee Share-Based Payment Accounting (Topic 718). The ASU supersedes ASC 505-50, Equity-Based Payment to Non-Employment and expends the scope of the Topic 718 to include stock-based payments granted to non-employees. Under the new guidance, the measurement date and performance and vesting conditions for stock-based payments to non-employees are aligned with those of employees, most notably aligning the award measurement date with the grant date of an award. The new guidance is required to be adopted using the modified retrospective transition approach. The Company adopted the new guidance effective January 1, 2019, with an immaterial impact on its financial statements and related disclosures.

The fair value of share options and similar instruments is estimated on the date of grant using a Binomial option-pricing valuation model. The ranges of assumptions for inputs are as follows:

•		Expected term of share options and similar instruments: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
•		Expected volatility of the entity’s shares and the method used to estimate it. Pursuant to ASC Paragraph 718-10-50-2(f)(2)(ii) a thinly-traded or nonpublic entity that uses the calculated value method shall disclose the reasons why it is not practicable for the Company to estimate the expected volatility of its share price, the appropriate industry sector index that it has selected, the reasons for selecting that particular index, and how it has calculated historical volatility using that index. The Company uses the average historical volatility of the comparable companies over the expected contractual life of the share options or similar instruments as its expected volatility. If shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.
•		Expected annual rate of quarterly dividends. An entity that uses a method that employs different dividend rates during the contractual term shall disclose the range of expected dividends used and the weighted-average expected dividends. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
•		Risk-free rate(s). An entity that uses a method that employs different risk-free rates shall disclose the range of risk-free rates used. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the expected term of the share options and similar instruments.

F-15

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.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718)”: Improvements to Nonemployee Share-Based Payment Accounting. This ASU was issued to expend the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Previously, these awards were recorded at the fair value of consideration received or the fair value of the equity instruments issued and were measured at the earlier of the commitment date of the date performance was completed. The amendments in this ASU require nonemployee share-based payment awards to be measured at the grant-date fair value of the equity instrument. ASU 2018-07 was effective for fiscal years, including interim periods within those fiscal years beginning after December 15, 2018. The Company adopted ASU 2018-07 effective on October 1, 2019 and it did not have a material impact on the Company’s consolidated financial statements.

Revenue Recognition

Effective January 1, 2018, the Company adopted ASC 606 – Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identifying the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

To 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.

F-16

Related Parties

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. Entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. Other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

The consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements.

The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

Contingencies

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, consolidated financial position, and consolidated results of operations or consolidated cash flows.

F-17

Uncertain Tax Positions

The Company did not take any uncertain tax positions and had no adjustments to its income tax liabilities or benefits pursuant to the provisions of Section 740-10-25 for the reporting period ended December 31, 2019.

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

In February 2016, the FASB issued ASU No. 2016-02,Leases (Topic 842) (ASU 2016-02).Under ASU No. 2016-2, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, the Company adopted this standard on January 1, 2019 using the modified retrospective method. The new standard provides a number of optional practical expedients in transition. The Company elected the package of practical expedients’, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs; and all of the new standard’s available transition practical expedients.

On adoption, the Company recognized a right of use asset of $638,593, operating lease liabilities of $638,593, based on the present value of the remaining minimum rental payments under current leasing standards for its existing operating lease.

The new standard also provides practical expedients for a company’s ongoing accounting. The Company elected the short-term lease recognition exemption for its leases. For those leases with a lease term of 12 months or less, the Company will not recognize ROU assets or lease liabilities.

In July 2017, the FASB issued ASU 2017-11,Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception” to simply the accounting for certain instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. Further, companies that provide earnings per share (“EPS”) data will adjust the basic EPS calculation for the effect of the feature when triggered and will also recognize the effect of the trigger within equity. The standard is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company adopted this new standard on January 1, 2019 and did not have a material impact on the Company’s consolidated financial statements.

F-18

In August 2018, the FASB issued ASU No. 2018-13, “Fair Value Measurement (Topic 820).” This standard modifies disclosure requirements related to fair value measurement and is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. Implementation on a prospective or retrospective basis varies by specific disclosure requirement. The standard also allows for early adoption of any removed or modified disclosures upon issuance while delaying adoption of the additional disclosures until their effective date. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”. This standard simplifies the accounting for income taxes. This standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted for all entities. The Company is currently assessing the impact of adopting this standard on its consolidated financial statements.

NOTE 4 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consisted of the following at December 31, 2019 and December 31, 2018:

	December 31, 2019		December 31, 2018
	(Audited)		(Audited)
ATM Machine	$	11,000	$	11,000
Computer		22,736		22,736
Furniture & Fixtures		49,408		49,408
HVAC		41,768		25,000
Land		697,420		697,420
Leasehold Improvements		333,529		333,529
Machinery and Equipment		408,133		405,233
Sign		43,594		43,594
Structural		1,017,359		1,017,359
Vehicle		79,744		79,744
Total		2,704,691		2,685,023
Less: Accumulated Depreciation		(564,360)		(336,243)
Property, Plant and Equipment - net	$	2,140,331	$	2,348,780

Depreciation expense totaled of $228,117 and $161,223 for the twelve months ended December 31, 2019 and 2018, respectively.

NOTE 5 – NON-CURRENT ASSETS

Other assets consisted of the following at December 31, 2019 and December 31, 2018:

	December 31, 2019 (Audited)		December 31, 2018 (Audited)
Rent Deposits	$	22,032	$	22,032
Security Deposits		5,491		9,491
Non-Current Assets	$	27,523	$	31,523

NOTE 6 – CONVERTIBLE DEBT

These debts have a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have been amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.05% to 2.63%, volatility ranging from 84.63% to 243.37%, trading prices ranging from $0.045 per share to $0.0548 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 $7,817,081 at December 31, 2019 and $19,783,034 at December 31, 2018.

F-19

See Below Summary Table

Convertible Debt Summary
	Debt Type	Debt Classification		Interest Rate	Due Date	Ending
	Debt Type	CT	LT	Interest Rate	Due Date	12.31.19	12.31.18
A	Convertible	X		10.0%	1-Jan-17	25,000	$ 25,000
B	Convertible		X	8.0%	1-Jan-21	76,288	65,700
C	Convertible		X	8.0%	1-Jan-21	38,144	32,850
D	Convertible		X	8.0%	1-Jan-21	242,737	209,047
O	Convertible		X	8.0%	1-Jan-21	126,760	109,167
P	Convertible		X	8.0%	1-Jan-21	61,271	52,767
Q	Convertible		X	8.0%	1-Jan-21	60,439	52,050
S	Convertible		X	8.0%	1-Jan-21	58,523	50,400
T	Convertible		X	8.0%	1-Jan-21	290,402	250,000
X	Convertible	X		8.0%	1-Jan-19	-	66,800
BB	Convertible	X		10.0%	1-Jan-20	50,000	50,000
CC	Convertible	X		10.0%	1-Jan-20	100,000	100,000
EE	Convertible		X	0.0%	31-Dec-21	-	500,000
KK	Convertible		X	8.0%	1-Jan-21	174,074	150,000
LL	Convertible		X	8.0%	1-Jan-21	694,164	600,000
MM	Convertible		X	8.0%	1-Jan-21	115,500	100,000
NN	Convertible		X	8.0%	1-Jan-21	576,470	500,000
OO	Convertible		X	8.0%	1-Jan-21	574,915	500,000
PP	Convertible		X	8.0%	1-Jan-21	566,137	500,000
QQ	Convertible		X	8.0%	1-Jan-21	167,508	150,000
RR	Convertible		X	8.0%	1-Jan-21	500,000	500,000
SS	Convertible		X	8.0%	1-Jan-21	150,000	150,000
TT	Convertible		X	8.0%	1-Jan-21	300,000	300,000
UU	Convertible		X	8.0%	1-Jan-21	150,000	150,000
VV	Convertible	X		5.0%	31-Jan-20	104,937	100,333
XX	Convertible		X	8.0%	1-Jan-21	100,000	100,000
YY	Convertible		X	8.0%	1-Jan-21	155,000	155,000
ZZ	Convertible		X	8.0%	1-Jan-21	150,000	150,000
AAA	Convertible		X	8.0%	1-Jan-21	95,000	95,000
BBB	Convertible		X	8.0%	1-Jan-21	80,000	80,000
CCC	Convertible	X		8.0%	1-Jan-20	25,000	25,000
DDD	Convertible		X	8.0%	1-Jan-21	70,000	-
EEE	Convertible		X	8.0%	1-Jan-21	150,000	-
FFF	Convertible		X	8.0%	1-Jan-21	15,000	-
GGG	Convertible		X	8.0%	1-Jan-21	75,000	-
HHH	Convertible		X	8.0%	1-Jan-21	35,000	-
III	Convertible		X	8.0%	1-Jan-21	25,000	-
JJJ	Convertible		X	8.0%	1-Jan-21	50,000	-
KKK	Convertible		X	8.0%	1-Jan-21	20,000	-
LLL	Convertible		X	8.0%	1-Jan-21	75,000	-
MMM	Convertible		X	8.0%	1-Jan-21	50,000	-
OOO	Convertible		X	8.0%	1-Jan-21	10,000	-
PPP	Convertible		X	8.0%	1-Jan-21	95,000	-
QQQ	Convertible		X	8.0%	1-Jan-21	25,000	-
Total Convertible Debt						6,503,269	5,869,114
Convertible Debt, Net of Discounts						$ 6,031,584	$ 4,677,851
Convertible Debt, Net of Discounts, Current						$ 303,710	$ 2,894,294
Convertible Debt, Net of Discounts, Long-term						$ 5,977,874	$ 1,783,557

F-20

FOOTNOTES FOR CONVERTIBLE DEBT SUMMARY TABLE

(A)

At the option of the holder the convertible note may be converted into shares of the Company’s common stock at the lesser of $0.40 or 20% discount to the market price, as defined, of the Company’s common stock. The Company is currently in discussions with the lender on a payment schedule. The outstanding balance of this note is convertible into a variable number of the Company’s common stock. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts 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 84.63% 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, 2019 including accrued interest and net of the discount amounted to $51,126.

A recap of the balance of outstanding convertible debt at December 31, 2019 is as follows:

Principal balance	$	25,000
Accrued interest		26,216
Balance maturing for the period ending:
December 31, 2019	$	51,126

The Company valued the derivative liabilities at December 31, 2019 at $24,625. The Company recognized a change in the fair value of derivative liabilities for the twelve months ended December 31, 2019 of $2,762 which were charged (credited) to operations. In determining the indicated values at December 31, 2019, since the debt is in default, the company used the maximum value these embedded options represent, with a trading price of $0.0548, and conversion prices of $0.40 per share.

(B), (C), (D)

All these amended debts have a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have been amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.05% to 2.59%, volatility ranging from 84.63% to 243.23%, trading prices ranging from $0.055 per share to $0.14 per share and a conversion price ranging from $0.03 per share to $0.04 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $385,743. The derivative liability associated with this note as of December 31, 2019 were $427,526. During 2019, interest of $49,572 was capitalized.

(O)

On March 31, 2016 the Company received $100,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 157.47%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $136,901. The derivative liability associated with this note as of December 31, 2019 were $151,730. During 2019, interest of $17,593 was capitalized.

F-21

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 157.47%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $66,173. The derivative liability associated with this note as of December 31, 2019 were $73,340. During 2019, interest of $8,504 was capitalized.

(Q)

On August 30, 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 154.71%, trading prices ranging from $0.065 per share to $0.27 per share a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $65,274. The derivative liability associated with this note as of December 31, 2019 were $72,345. During 2019, interest of $8,389 was capitalized.

(S)

On December 1, 2016 the Company received $50,000 from the issuance of convertible debt. Interest is stated at 12%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $63,205. The derivative liability associated with this note as of December 31, 2019 were $70,051. During 2019, interest of $8,123 was capitalized.

(T)

On December 30, 2016 the Company received $250,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $313,634. The derivative liability associated with this note as of December 31, 2019 were $347,607. During 2019, interest of $40,402 was capitalized.

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. 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 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.04 per share. The note balance and accrued interest of $84,172 was converted to 2,805,733 shares of common stock. Derivative liabilities of $98,533 associated to this note as of July 1, 2019 was reclassified to APIC. No gain or loss on conversion was recorded as conversion was made within the terms of agreement.

F-22

(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 balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $55,003. The accrued interest of $5,000 was converted to 166,666 shares of common stock on September 15, 2019. The derivative liabilities of $5,853 associated to this note was reclassified to APIC. The derivative liability associated with this note as of December 31, 2019 were $53,919. On January 1, 2019, due date of this note has extended until January 1, 2020. The Lender and the Company are in discussions to extend the maturity dates. No gain or loss on conversion was recorded as conversions were made within the terms of agreement.

(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 balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $110,006. The accrued interest of $10,000 was converted to 333,333 shares of common stock on September 15, 2019. The Derivative liabilities of $11,706 associated to this note was reclassified to APIC. The derivative liability associated with this note as of December 31, 2019 were $107,838. On January 1, 2019, due date of this note has extended until January 1, 2020. The Lender and the Company are in discussions to extend the maturity dates. No gain or loss on conversion was recorded as conversions were made within the terms of agreement.

(EE)

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 were 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. As of December 31, 2019, the debt discount was amortized in full.

On January 1, 2018 the holder of the note extended the due date until December 31, 2021.

As of December 31, 2019, the balance of the debt was $250,000 which 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 9% for calculation purposes. The net balance of $250,000 of the non-convertible portion is reflected on the balance sheet. The convertible note balance of $500,00 was converted to 50,000 shares of Preferred Stock. Derivative liabilities of $738,816 associated to this note as of October 14, 2019 was reclassified to APIC.

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.85% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.27 per share and a conversion price of $0.03 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $188,000. The derivative liability associated with this note as of December 31, 2019 were $208,364. During 2019, interest of $24,704 was capitalized.

F-23

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.85% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.31 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $749,697. The derivative liability associated with this note as of December 31, 2019 were $830,904. During 2019, interest of $94,164 was capitalized.

(MM)

On January 31, 2017, the Company received $100,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.07 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.87% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.31 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $124,690. The derivative liability associated with this note as of December 31, 2019 were $138,196. During 2019, interest of $15,500 was capitalized.

(NN)

On February 7, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.10 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.87% to 2.59%, volatility ranging from 84.63% to 154.71%, trading prices ranging from $0.055 per share to $0.31 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $622,588. The derivative liability associated with this note as of December 31, 2019 were $690,026. During 2019, interest of $76,470 was capitalized.

(OO)

On February 21, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.10 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.87% to 2.59%, volatility ranging from 84.63% to154.71%, trading prices ranging from $0.055 per share to $0.30 per share. The balance of the convertible note at December 31, 2019 including accrued interest and net of the discount amounted to $620,908. The derivative liability associated with this note as of December 31, 2019 were $688,164. During 2019, interest of $74,915 was capitalized.

(PP)

On May 11, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.05 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.87% to 2.59%, volatility ranging from 84.63% to 139.70%, trading prices ranging from $0.055 per share to $0.27 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $611,428, net of the discount of $2,586. The derivative liability associated with this note as of December 31, 2019 were $677,657. During 2019, interest of $66,137 was capitalized.

F-24

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.87% to 2.63%, volatility ranging from 84.63% to 139.70%, trading prices ranging from $0.055 per share to $0.27 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $180,909, net of the discount of $931. The derivative liability associated with this note as of December 31, 2019 were $200,504. During 2019, interest of $17,508 was capitalized.

(RR)

On November 1, 2017, the Company received $500,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.49% to 2.63%, volatility ranging from 84.63% to 138.23%, trading prices ranging from $0.055 per share to $0.27 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $586,804, net of the discount of $3,793. The derivative liability associated with this note as of December 31, 2019 were $650,366.

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.49% to 2.63%, volatility ranging from 84.63% to 131.81%, trading prices ranging from $0.0569 per share to $0.27 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $174,374, net of the discount of $1,190. The derivative liability associated with this note as of December 31, 2019 were $193,262.

(TT)

On February 5, 2018, the Company received $300,000 from the issuance of convertible debt. Interest is stated at 8% The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.49% to 2.63%, volatility ranging from 84.63% to 132.27%, trading prices ranging from $.055 per share to $0.49 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $345,633, net of the discount of $2,357. The derivative liability associated with this note as of December 31, 2019 were $383,072.

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.49% to 2.63%, volatility ranging from 84.63% to 132.27%, trading prices ranging from $0.055 per share to $0.14 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $171,304, net of the discount of $1,088. The derivative liability associated with this note as of December 31, 2019 were $189,859.

F-25

(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 84.63% to 132.27%, trading prices ranging from $0.055 per share to $0.14 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $113,332, net of the discount of $1,227. The derivative liability associated with this note as of December 31, 2019 were $94,134. During 2019, interest of $4,604 was capitalized.

(XX)

On May 29, 2018, the Company received $100,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.63%, volatility from 84.63% to 127.07%, trading prices ranging from $0.055 per share to $0.16 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $112,734, net of the discount of $871. The derivative liability associated with this note as of December 31, 2019 were $124,945.

(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. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.81%, volatility from 84.63% to 126.88%, trading prices ranging from $0.055 per share to $0.13 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $173,039, net of the discount of $1,672. The derivative liability associated with this note as of December 31, 2019 were $191,782.

(ZZ)

On August 13, 2018, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.81%, volatility from 84.63% to 126.90%, trading prices ranging from $0.055 per share to $0.13 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $166,603, net of the discount of $1,575. The derivative liability associated with this note as of December 31, 2019 were $184,649.

F-26

(AAA)

On September 24, 2018, the Company received $95,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.83%, volatility from 84.63% to 126.38%, trading price at $0.055 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $104,641, net of the discount of $947. The derivative liability associated with this note as of December 31, 2019 were $115,976.

(BBB)

On November 23, 2018, the Company received $80,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. In January 2019, the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.81%, volatility from 84.63% to 118.96%, trading price at $0.055 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $87,066, net of the discount of $1,013. The derivative liability associated with this note as of December 31, 2019 were $96,497.

(CCC)

On December 21, 2018, the Company received $25,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.05 per share. On January 22, 2019, the ratchet provision was activated due to issuance of another convertible note. As such, the conversion price was decreased from $0.05 per share to $0.03 per share. As the change is greater than 10%, the discount of $25,000 was recorded as a loss on extinguishment. the maturity date of the notes had been extended to January 1, 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.60% to 2.63%, volatility from 84.63% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $27,055. The derivative liability associated with this note as of December 31, 2019 were $22,472.

(DDD)

On January 22, 2019, the Company received $70,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. Note is due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.59%, volatility from 84.63% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $75,262, net of the discount of $36,479. The derivative liability associated with this note as of December 31, 2019 were $83,415.

F-27

(EEE)

On February 11, 2019, the Company received $150,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. Note is due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.48%, volatility from 84.63% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $160,619, net of the discount of $80,435. The derivative liability associated with this note as of December 31, 2019 were $178,017.

(FFF)

On March 20, 2019, the Company received $15,000 from the issuance of convertible debt. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. Note is due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $15,940, net of the discount of $8,499. The derivative liability associated with this note as of December 31, 2019 were $17,667.

(GGG)

On April 6, 2019 the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to the May 2017 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $79,422, net of the discount of $43,514. The derivative liability associated with this note as of December 31, 2019 were $88,025.

(HHH)

On April 22, 2019 the Company received $35,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $36,941, net of the discount of $20,831. The derivative liability associated with this note as of December 31, 2019 were $40,942.

F-28

(III)

On May 6, 2019 the Company received $25,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $26,310, net of the discount of $15,223. The derivative liability associated with this note as of December 31, 2019 were $29,159.

(JJJ)

On May 21, 2019 the Company received $50,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $52,455, net of the discount of $31,218. The derivative liability associated with this note as of December 31, 2019 were $58,137.

(KKK)

On June 5, 2019 the Company received $20,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 2.40%, volatility from 82.70% to 107.76%, trading price of ranging from $0.055 to $0.11 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $20,916, net of the discount of $12,813. The derivative liability associated with this note as of December 31, 2019 were $23,182.

(LLL)

On July 2, 2019 the Company received $75,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 1.75%, volatility from 105.36% to 107.76%, trading price of ranging from $0.055 to $0.067 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $77,992, net of the discount of $50,273. The derivative liability associated with this note as of December 31, 2019 were $86,440.

F-29

(MMM)

On August 30, 2019 the Company received $50,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.59% to 1.75%, volatility from 105.36% to 107.76%, trading price of ranging from $0.055 to $0.064 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $51,348, net of the discount of $37,551. The derivative liability associated with this note as of December 31, 2019 were $56,910.

(OOO)

On November 4, 2019, the Company received $10,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.56% to 1.59%, volatility from 107.76% to 107.76%, trading price of ranging from $0.055 to $0.056 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $10,125, net of the discount of $8,656. The derivative liability associated with this note as of December 31, 2019 were $11,222.

(PPP)

On November 14, 2019 the Company received $95,000 from the issuance of convertible debt to the Cayman Venture Capital Fund pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.55% to 1.59%, volatility from 107.76% to 107.76%, trading price of ranging from $0.051 to $0.055 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $95,979, net of the discount of $82,440. The derivative liability associated with this note as of December 31, 2019 were $106,375.

(QQQ)

On December 19, 2019, the Company received $25,000 from the issuance of convertible debt to the High Net Worth Investor pursuant to the January 2018 Financing Agreement, as amended. Interest is stated at 8%. The Note and Interest is convertible into common shares at $0.03 per share. The Note is Due in January of 2021. This note has a price adjustment provision. Therefore, the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 1.52% to 1.59%, volatility from 107.76% to 107.76%, trading price of ranging from $0.055 to $0.060 per share. The balance of the convertible note at December 31, 2019 including accrued interest amounted to $25,066, net of the discount of $24,208. The derivative liability associated with this note as of December 31, 2019 were $27,780.

F-30

NOTE 7 – NON-CONVERTIBLE DEBT

A-Non Related Party

	December 31, 2019		December 31, 2018
Note 3		-0-		-0-
Note 4		-0-		-0-
Note 5		9,312		9,312
Note 6		-0-		-0-
Total Non-Convertible Debt		9,312		9,312

(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, 2019 with an outstanding balance of $9,312.

(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, 2019 was $201,092. On January 1, 2019 the holder of the note extended the due date until December 31, 2021.

F-31

NOTE 8 – STOCKHOLDERS’ EQUITY

The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001, of which 100,000 shares have been designated as Series C convertible preferred stock (“Series C” or “Series C preferred stock”). The Board has the authority to issue the shares in one or more series and to fix the designations, preferences, powers and other rights, as it deems appropriate.

Each share of Series C has 434 votes on any matters submitted to a vote of the stockholders of the Company and is entitled to dividends equal to the dividends of 434 shares of common stock. Each share of Series C preferred stock is convertible at any time at the option of the holder into 434 shares of common stock.

The Company has 500,000,000 shares of common stock authorized with a par value of $0.001. Each share of common stock has one vote per share for the election of directors and all other items submitted to a vote of stockholders. The common stock does not have cumulative voting rights, preemptive, redemption or conversion rights.

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 $138,500. As of December 31, 2018, all shares were issued on 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 3,200,000 shares of Kaya Holdings Inc. for services at value of $301,510. As of December 31, 2018, 1,000,000 shares were unissued and valued at $65,000.

F-32

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 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.

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.

On March 5, 2019, total of 7,785,952 shares of common stock had been issued from stock payable to settle the conversion dated on September 16, 2018.

On October 11, 2019, Kaya Brands International, Inc. issued 5 shares of preferred stock for cash received of $75,000. As of December 31, 2019 all shares were issued.

On October 16, 2019, total of 3,305,732 shares of common stock of Kaya Holdings Inc. in satisfaction of 3 promissory notes dated on September 21, 2015 in amount of $5,000, September 21, 2015 in amount of $10,000, November 15, 2016 in amount of $84,172. Total of 50,000 shares of preferred stock had been issued in satisfaction 2 promissory notes for a total of $500,000.

On October 16, 2019, total of 6,000,000 shares of common stock of Kaya Holding Inc. had been issued for related parties service performed. The shares were valued at $390,000. Total of 4,600,000 shares of common stock has been issued for service performed by employees. The shares were valued at $280,300.

NOTE 9 DERIVATIVE LIABILITIES

Effective January 1, 2019, an equity-linked financial instrument with a down round feature that otherwise is not required to be classified as a liability under the guidance in Topic 480 is evaluated under the guidance in Topic 815, Derivatives and Hedging, to determine whether it meets the definition of a derivative. If it meets that definition, the instrument (or embedded feature) is evaluated to determine whether it is indexed to an entity’s own stock as part of the analysis of whether it qualifies for a scope exception from derivative accounting. Generally, for warrants and conversion options embedded in financial instruments that are deemed to have a debt host (assuming the underlying shares are readily convertible to cash or the contract provides for net settlement such that the embedded conversion option meets the definition of a derivative), the existence of a down round feature results in an instrument not being considered indexed to an entity’s own stock. This results in a reporting entity being required to classify the freestanding financial instrument or the bifurcated conversion option as a liability, which the entity must measure at fair value initially and at each subsequent reporting date.

However, due to a recognition of tainting, due to variable conversion price on some of the convertible notes, all convertible notes are considered to have a derivative liability, therefore the Company accounted for these Notes under ASC Topic 815-15 “Embedded Derivative.” The derivative component of the obligation is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts are amortized to interest expense over the respective term of the related note. In determining the indicated value of the convertible note issued, the Company used the Binomial Options Pricing Model with a risk-free interest rate of ranging from 0.05% to 2.63%, volatility ranging from 84.63% to 243.22%, trading prices ranging from $0.045 per share to $0.41 per share and a conversion price ranging from $0.03 per share to $0.10 per share.

F-33

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, 2018	$	19,783,034
Initial		1,327,710
Change in Derivative Values		(12,438,755	)
Conversion of debt-reclass to APIC		(854,908	)
Balance as of December 31, 2019	$	7,817,081

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 initial derivative liabilities of $692,969 and $1,154,629 for the new notes issued for the years ended December 31, 2019 and 2018, respectively. The Company recorded derivative liability expense of $634,741 and $3,370,329 for the years ended December 31, 2019 and 2018, respectively. The Company recorded total initial derivatives of $1,327,710 and $4,524,958 for the years ended December 31, 2019 and 2018, respectively.

The Company recorded a change in the value of embedded derivative liabilities income of $12,438,755 and $13,900,712 for the years ended December 31, 2019 and 2018, respectively.

NOTE 10 – DEBT DISCOUNT

Debt discount amounted to $471,685 as of December 31, 2019 and $1,191,263 as of December 31, 2018.

The Company recorded the amortization of debt discount of $1,412,548 and $2,583,712 for the years ended December 31, 2019 and 2018, respectively.

NOTE 11 – RELATED PARTY TRANSACTIONS

At December 31, 2014, the Company was indebted to an affiliated shareholder of the Company for $840,955, which consisted of $737,100 principal and $103,895 accrued interest, with interest accruing at 10%. On January 2, 2014, the Company entered into a Debt Modification Agreement whereby the total amount of the debt was reduced to $750,000 and no interest accrued until December 31, 2015. $500,000 of the debt is convertible into 50,000 Series C Convertible Preferred Shares of KAYS. The remaining $250,000 is not convertible.

In 2018 and 2019, the Company issued stock grants to Craig Frank for 3,000,00 shares of KAYS stock each year, pursuant to his employment agreement via board resolution. Jordi Arimany and Carrie Schwarz for 100,000 shares of KAYS stock. The stock was issued from Treasury as restricted stock and carries a one year restriction before it can be registered for resale pursuant to Rule 144.

On October 14, 2019 the shareholder submitted a conversion notice and the $500,000 in convertible debt was converted into 50,000 Series C Preferred shares of KAYS stock. The stock was issued from Treasury as restricted stock and carries a minimum of one year restriction before it can be registered for resale pursuant to Rule 144.

F-34

Bruce Burwick acquired the property for satisfaction of a promissory note due him for $1,433,000.00. The purchase price of $1.3 million for the OLCC licensed marijuana production and processing facility, consisting of the building and equipment was paid for by the issuance of 12 million shares of KAYS restricted stock to the seller at closing. The shares carry a lock-up-restriction that allows for their staged eligibility for resale over a 61-month period from the date of the purchase of the facility by KAYS. Additionally, the seller purchased 2.5 million restricted shares for $250,000 in cash in a private transaction with the Company. The proceeds from the sale of those shares were and are being used for acquisition related expenses, transitional operating costs and facility capital improvements with respect to the production and processing facility we purchased.

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.

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, 2019, the note was paid in full.

On September 9, 2015 the Company received a total of $100,000 from an accredited investor in exchange for a two year note in the aggregate amount of $100,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 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, 2019, the note was paid in full.

On May 9, 2016 the Company received a total of $75,000 from an accredited investor in exchange for a two year note in the aggregate amount of $75,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 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, 2019, the note was paid in full.

On May 17, 2016 the Company received a total of $75,000 from an accredited investor in exchange for a two year note in the aggregate amount of $75,000 with interest accruing at 10%. The note holder is entitled to subscribe for and purchase from the company 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, 2019, the note was paid in full.

F-35

Warrants issued to Non-Employees

		Weighted	Weighted
		Average	Average
	Warrants	Exercise	Contract
	Issued	Price	Terms Years
Balance as of December 31, 2018	11,065,540	0.0316297	3.8
Granted	-0-	-0-	-0-
Exercised	-0-	-	-
Expired	-0-	-	-
Balance as of December 31, 2019	11,065,540	0.0316297	3.55

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company has several operating leases for an office and store lease in Fort Lauderdale, Florida and several locations in Oregon under arrangements classified as leases under ASC 842.

Effective June 12, 2017, the Company leased the office space in Fort Lauderdale, Florida under a 5-year operating lease expiring June 30, 2022. The lease provides for increases in future minimum annual rental payments based on defined annual increase beginning with monthly payments of $4,017 and culminating in a monthly payment of $4,839. The total amount of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term of the lease. The lease was terminated on July 3, 2019 and the Company agreed to issue landlord 500,000 shares of common stock as penalty for early termination.

Effective June 1, 2019, the Company leased the office space in Fort Lauderdale, Florida under a 2-year operating lease expiring May 31, 2021. The rental payment is $1,802 per month. The total amount of rental payments due over the lease term is being charged to rent expense according to the straight-line method over the term of the lease.

Effective 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.

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.

F-36

The Company has right-of-use assets of $284,042 and operating lease liabilities of $288,899 as of December 31, 2019. Operating lease expense for the twelve months ended December 31, 2019 and 2018 were $218,498 and $310,193, respectively.

Maturity of Lease Liabilities at December 31, 2019		Amount
	2020		186,005
	2021		101,675
	2022		27,300
	Later years		—
	Total lease payments		314,980
	Less: Imputed interest		(26,081	)
	Present value of lease liabilities	$	288,899

Legal Matters

On August 7, 2018 KAYS filed a Notice of Appeal with the State of Oregon Land Use Board of Appeals (LUBA).

F-37

On August 16^th, 2019 the Land Use Board of Appeals issued an order granting attorney’s fees and costs in the amount of $25,158 be paid to KAYS and the funds were received in September, 2019.

B. On December 13, 2019 Siegelaub, Rosenberg, P.A. filed a suit against the Company in Broward County Court seeking payment of $6,000 together with costs,prejudgment interest and attorney’s fees for an unpaid invoice for work that it alleged was performed in preparation of the Company’s 2018 10-K (the “Siegelaub Claim”)

C. As previously reported in our periodic reports filed under the Securities Exchange Act of 1934, in the fourth quarter of 2018, KAYS concluded the purchase of theEugene, Oregon based Sunstone Farms grow and manufacturing facility, which is licensed by the Oregon Liquor Control Commission (the “OLCC ”) for both the production (growing) of medical and recreational marijuana flower and the processing of cannabis concentrates/extracts/edibles. The purchase included a 12,000 square foot building housing an 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 well as a substantial amount of manufactured extracts and related cannabis products. KAYS entered into a management agreement with the holder of existing OLCC licenses (“Sunstone ”) to oversee operations at the facility pending transfer of the license to KAYS, which were aware would be an extended and cumbersome process.

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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. statutory 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 increase the Company’s deferred tax asset related to the Company’s net operating loss by approximately $624,000 and increase the Company’s valuation allowance by approximately $624,000 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, 2019, and 2018 we have not recorded any uncertain tax positions in our financial statements.

The effective US Federal Income Corporate Tax Rates for 2019 and 2018 are 21% and 21%, respectively.

The Company has net operating loss carry forwards of approximately $9,724,969 at December 31, 2019 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, 2019		Year Ending December 31, 2018
Deferred Tax Asset		2,042,243		1,520,544
Valuation Allowance		-2,042,243		-1,520,544
Net Deferred Tax Asset	$	—	$	—

Note 16- Subsequent Events

Effective January 1, 2020 KAYS and the Institutional Investor further agreed to amend the May 2017 Financing Agreement as follows: (a) extend the maturity date all then outstanding Company promissory notes held by the Institutional Investor and its affiliate, NWP Finance LTD, from January 1, 2021 to January 1, 2024; (b) notwithstanding item “a” upon the Company receiving US$4,000,000.00 in new financing from sources other than the Holder, the Holder shall have the option to have the Company allocate 10% of any additional financing beyond this amount for purposes of early repayment of any Notes still held by the Holder; (c) notwithstanding item “a” provide for an “Acceleration Provision” in the event of a change in the event that Craig Frank is no longer the CEO of the Company, and/or W. David Jones is no longer retained to provide Business Consulting Services to the Company through BMN Consultants (either through resignation, termination or through determination by the Board of Directors that the respective party is medically incapable of conducting their duties), then the Holder of this Note is entitled to enact the Acceleration Provision by notifying the Company’s Board of Directors or Corporate Counsel which provides for the Maturity Date to be accelerated from January 1, 2024 to ninety (90) days from receipt of said notice; (d) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (e) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (f) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share amount.

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On January 10, 2020 the Institutional Investor purchased an additional $75,000 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 subject to the adjustments as provided above.

Effective January 1, 2020 KAYS and the High Net Worth Investor further agreed to amend the January 2018 Financing Agreement as follows: (a) extend the maturity date all then outstanding Company promissory notes held by the High Net Worth Investor Institutional Investor to January 1, 2021 (b) the limitation on conversion of shares by the Holder to an amount less than 4.99% of the total issued and outstanding stock of the Company is automatically deemed waived with respect to a conversion of the Notes in connection with the occurrence of any of the corporate events described in Section 8(h) of the Notes; (c) the corporate events listed in Section 8(h) are also deemed to include a buyback/repurchase of the Company’s Shares by the Company, taking the Company “private”, a tender offer for the Company’s shares by another entity or individual(s) or other such action; and (d) the Conversion Price of the Notes will be adjusted if the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Conversion Notice is less than $0.05 per share, the Conversion Price for the shares shall be adjusted to the lesser of: sixty percent (60%) of the average closing price of the Company’s common stock for the thirty (30) trading days immediately preceding the date of the Company’s receipt of the Holder’s Election Notice reflecting such election, but in any event not less than $.01 per share, OR $.03 per share, and in any event not to exceed such $.03 per share amount.

On January 8, 2020 the High Net Worth Investor purchased an additional $15,000 in principal amount of January 2018 Notes from the Company under the January 2018 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 subject to the adjustments as provided above.

On February 7, 2020 KAYS sold a private placement via subscription agreement to an accredited investor for $15,000. The private placement consisted of 250,000 shares of the Company’s common stock (“KAYS Shares”); 250,000 one-year Class A warrants (the “Class A Warrants”), each entitling the holder to purchase one additional KAYS Share, at an exercise price of $0.12 per KAYS Share; 250,000 two-year Class B warrants (the “Class B Warrants,” and together with the Class A Warrants, collectively, the “Warrants”), each entitling the holder to purchase one additional KAYS Share, at an exercise price of $0.18 per KAYS Share; and 250,000 shares of common stock of Kaya Brands International, Inc. (the “KBI Shares”). Kaya Brands International, Inc. is a newly-incorporated subsidiary of KAYS through which the Company intends to undertake its expansion into foreign operations.

On February 18, 2020 Greekkannabis PC (“GKC”) and KAYS/KBI entered into an agreement to extend the date of the option for KAYS/KBI to acquire a 50% ownership interest in GKC until June 1, 2020 as the first stage of the licensing had not yet been approved by the Greek Government and the Parties due diligence process had not yet been completed.

On April 22, 2020 KAYS/KBI received confirmation from their Greek Counsel that the Greek Government had awarded the crucial Installation License for the Kaya Kannabis project to build a 470,000 square foot Medical Cannabis Production Complex on land outside of Athens in Thebes, Greece. For more information on the project please see the information elsewhere in this report.

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Kaya (KAYS) 10-K2019 FY Annual report

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