Business Overview
PART I
Item 1. Business.
Overview
operational experience as a vertically integrated legal cannabis enterprise.
KAYS is the first
dispensary, as well as the first to vertically integrate by adding cultivation
and manufacturing. The Company 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.
Additionally, as noted in an 8-K filing dated
its cannabis operational experience in
the requisite licenses from the
Legal Psilocybin Manufacturing and
license the supervised use of psychedelic therapeutics for treatment of a range
of physical and mental health issues.
expected to begin issuing licenses in
comprehending and complying with OHA mandates, and sets the stage for KAYS First
Mover Advantage in the emerging US Psychedelic Therapeutics Industry.
Cannabis Operations
The Company’s cannabis business strategy seeks to achieve four fundamental
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.
each responding to various demands and opportunities in the cannabis industry,
to aid in the execution of these objectives:
Company’s
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
cannabis sector where it commenced operations in
universally recognized for its excellence in cannabis cultivation and is part of
the famed “Green Triangle” of expert cannabis cultivation that also includes
the Company to combine “traditional” methods of cannabis cultivation with modern
agriculture techniques.
The Company’s US cannabis operations are currently focused in
of the Company’s operations are licensed by the
(the “OLCC’), which has jurisdiction over legal medical and recreational
cannabis grow, production and retail operations.
The Company currently has two 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
its South Salem Location as it recently entered into an agreement with the OLCC
to resolve an Administrative Action filed by the OLCC (as previously disclosed
in the Company’s Annual Report on form 10-K for the period ending
2021
period ending
agreement (which is pending approval by the OLCC at its November meeting), the
Company has agreed to either enter into a purchase and sale agreement for its
retail license in
surrender the license. The Company has listed the license and associated
business at that location with an
The Company is in process of seeking to expand its
footprint to potentially offset the loss of the
create a streamlined corporate model to assist with franchising efforts of the
Kaya Shack retail cannabis stores. Additionally, the Company is also evaluating
other locations in
cannabis operations
The Company has developed its own proprietary Kaya Farms™ strains of cannabis,
which it has grown and produced at the various medical and recreational grows
that the Company has operated and maintained over the past seven years in
for over 200 top strains of cannabis that it has assembled from its own grow
operations, contract growers, vendors for its retail stores and other commercial
sources which it intends to utilize to launch international grow operations in
23
The Company owns a 26-acre farm in
previously obtained approvals to construct an OLCC Licensed Cannabis grow. Due
to a substantial increase in the value of the farm based on the large amount of
acres that it encompasses that are not relative to cannabis production, the
Company has listed the property for sale. If the property is sold the Company
intends to allocate a significant portion of the proceeds to enhance its Oregon
Cannabis Production, Processing and Retail Footprint, develop its planned Oregon
Psilocybin Business Plan and further develop its international projects.
Kaya Brands USA
intellectual property associated with the Kaya family of brands and seek out US
based projects and ventures to enhance stockholder 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 is placing current expansion emphasis on international opportunities and
brand extensions. While the US Cannabis markets initially received a strong tail
wind from the 2021 change in administration and the fact that US Cannabis
Banking and Taxation Laws and Regulations are forecast to become more industry
friendly, KAYS believes that it will still be some years until such time that
the Federal Laws allow for Interstate Cannabis Commerce and true economies of
scale to develop within the emerging
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.
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
Projects currently under development include licensing of the Kaya Farms™ brand
to develop cultivation projects in
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
institutional and retail investment capital and liquidity for both Canadian and
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 stock in KBI to stockholders 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 stockholders. 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
stockholder value.
Kaya Farms Greece
On
Farms Greece or “KFG”) and Greekkannabis (“GKC”, an
Company
acquired in January, 2021 and the remaining 25% was acquired in July, 2021.
GKC’s projects include two medical cannabis cultivation and processing projects
in
constructed, approximately 50,000 square feet in total under-air space) situated
on 2.8 acres of land, with its own independent industrial electrical power
center and ample water supply to service the needs of the facility.
Epidaurus Project
cultivation, a 15,000 square foot EU-GMP extraction and processing facility, and
a 10,000 square foot EU-GMP packing area. There is ample room for expansion with
room to construct an additional 15,000 square feet on site. The joint venture
has been awarded its development license to from the Greek authorities and is
awaiting project financing to complete the acquisition of the
and complete the installation of EU Certified equipment to gain final licensing
of the facility.
proprietary branded cannabis products for distribution in legal EU markets while
awaiting greater legal cannabis demand to emerge prior to developing a
large-scale capacity in
purchase option on 15 acres in
cultivation capacities and the company expects to develop the site once legal
cannabis demand warrants an increase in capacity.
Kaya Farms Israel
On
Shalvah has been awarded its initial permit from the “YAKAR”, the
Medical Cannabis
cannabis cultivation and processing facility. This initial permit grants Kaya
Shalvah permission to proceed with its plans to develop commercial scale
cannabis cultivation and processing in
24
We have chosen to become active in the Israeli cannabis market because of this
position as global center of cannabis science, where technologies are
specifically developed to enhance cannabis cultivation processes and yields, and
innovative consumer products are emerging that have potential interest for both
the medical and recreational markets throughout the world.
Kaya Shalvah is currently focused on two separate paths of development to launch
its Israel Operations- the first being through participation in the government
sponsored Greenegev Cannabis Ecosystem in Yerucham, Israel and the second path
being through potentially acquiring an interest in currently licensed medical
cannabis production and processing facilities that are already operating in
Psilocybin Therapeutics Business Plan
In
and license the supervised use of psychedelic therapeutics for treatment of a
range of physical and mental health issues.
is expected to begin issuing licenses in
own and operate one (1) Psilocybin manufacturing and processing facility for the
production of Psilocybin Mushrooms and derived therapeutics (“Psilocybins”), and
up to five (5) Psilocybin Facilitation Centers where clients would go to ingest
Psilocybins and experience effects under the supervision of state licensed
Facilitators.
First Mover Advantage.
The OHA also launched
critical experience in comprehending and complying with OHA mandates. The
psilocybin opportunity is a logical extension for
customer, regulations, and operations, as well as our familiarity with
regulators, are synergistic with our current mission, and can be leveraged
within our current operational infrastructure. We anticipate being able to
respond to market demand rapidly, upon licensing.
The Licenses to be issued in
of Psilocybin manufacturing and treatment centers, and KAYS is positioned to be
a first mover due to its operating history in
process of enrolling staff that qualify for the licensing into the training
programs that have been approved for state certification, and is in process of
identifying a site for Psilocybin Manufacturing and Processing and up to five
(5) sites to open and operate Psilocybin Facilitation Centers, subject to
financing and final regulatory approval.
The Science
Psilocybin, a naturally occurring compound found in “magic mushrooms”, is one of
an emerging class of psychedelic medicines that contain potent psychoactive
chemicals that can serve to affect human perception, emotions, and other
cognitive functions. Psychedelic medicines have been found to have
ground-breaking potential in treating a range of physical and mental disorders
including anxiety and panic disorder, resistant depression, opiate addiction,
adult attention deficit hyperactivity disorder (“ADHD”), opioid addiction,
post-traumatic stress disorder (“PTSD”), and acute and chronic pain.
A 2020 study in the
that 71% of the patients with severe, previously treatment-resistant depression,
showed “clinically significant improvement” that lasted at least four weeks and
with “low potential” for addiction. Speaking on the study one of the study’s
co-authors,
adjunct professor at the
Research
settings, this provides relief from debilitating mental health problems for some
people.”
The Numbers
Insight Ace Analytic, an industry research firm, reports that the global
psychedelic therapeutics market was valued at
estimates the market will reach
during the forecast period of 2022-2028. Other market estimates include the
research firm Research & Markets’ estimate that the psychedelic drugs market
will reach
As recently reported in the
high probability of failure but a potential upside of 10, 20, maybe 50 times.”
Additionally, he sees many of the infrastructure companies for the industry as
having a lot higher probability of becoming cash flow positive.
While
medical use with a regulatory framework in place to issue licenses for their
manufacture and sale,
Arbor, Michigan
decriminalized small quantities. Other activity in the
§ The
centers for the treatment of veterans. Many veterans' groups are advocating making psychedelic treatments available for veterans, particularly those with PTSD.
§
the medical use of psilocybin and have funded research to explore the effects
of psilocybin on certain mental health conditions.
§ Colorado and
psilocybin.
§ The
treat certain disorders. Internationally:
§ The Canadian government has been sued by an advocate group to force the
legalization of psilocybin and other psychedelics.
§ Possession of psilocybin is legal in
and
§ Psilocybin is legal to possess, sell, transport, and cultivate in
25 Corporate Information
We are incorporated in the
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 Annual Report.
The Global Cannabis Industry
The global cannabis market is being driven by the increasing number of countries
passing legislation to decriminalize the use of cannabis and legalize cannabis
for medicinal use. This change in legislation is the result of an increase in
public awareness to the medicinal benefits of cannabis and greater social
acceptance of cannabis use.
According to New Frontier Data, more than 260 million adults globally consumed
cannabis at least once annually in 2018 – placing global spending on cannabis
(legal & illicit) at
Market report projects the global cannabis market to reach
2027, which represents a CAGR of 34% from 2019-2027.
largest until 2023, when they expect North American (
billion
billion
Of the
demand (legal & illicit) valued at
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
Cannabis Act came into effect, making
recreational cannabis. 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 overseas infrastructure
projects to produce cannabis at costs lower than those in
competition from
some decline of valuation and some Canadian companies have been forced to shrink
operations and lessen their developing global footprint.Canadian cannabis
companies currently export to more than twenty countries. Up until 2020, most
exports of cannabis from
oil and flowers from
of weight, but have declined, with most flowers being exported to Israel and the
majority of oil being exported to
The United States
new genetics, cultivation techniques, derivative products, and delivery methods.
Cannabis remains federally illegal in
transport and sale of cannabis prohibited. Nonetheless, support for legal
recreational cannabis remains above 60% in most reputable polls, and 48 U.S.
states have some form of legal medical or recreational cannabis (including
hemp/CBD). Only
States with some type of legal medical cannabis includes
Island
States permitted the sales of recreational, or “adult-use” cannabis are
Dakota
D.C.
Despite the number of individual states permitting the cultivation and
distribution of cannabis (including hemp), in 2021 the
pass a bill that would reclassify cannabis from a Schedule I drug under
the Controlled Substances Act, which would have allowed cannabis companies
access to banking and relief from punitive
Some key points about the European medical cannabis market are:
§ New Frontier Data estimates the European cannabis market (legal & illicit)
generates$69 billion USD annually.
§ Prohibition Partners Europe forecasts
cannabis market worldwide by 2024, with a total value of$39.1 billion .
§
$474 million by the end of 2021. They estimate the market to grow with a CAGR of 67.4% from 2021 to reach$3.75 billion by 2025.
§
cannabis market) in 2024, with a market value of$39.1 billion toNorth America's $37.9 billion .
§ In Europe Germany continues to be largest and fastest growing medical
cannabis market. Sales of insurance covered cannabis grew to 67% in 2019.
26
§ Total European market sales, including isolated cannabinoids, finished
pharmaceutical products, cannabis flower and full spectrum cannabis products
exceeded $295 million in 2019.
§
2021. By 2025, it is expected that countries likeFrance and theUnited Kingdom will have developed their patient access considerably, growing to represent a significant share of the European market. Israel andGreece
In
cannabis, and less than a year later Greek leaders approved Law 4523 and Joint
Ministerial Decision No. 51483, which permitted farming and production of
medical cannabis. In 2020 the Greek Parliament passed legislation that further
relaxed cannabis export regulations, now permitting the bulk export of cannabis
flower.
Israel is currently the largest importer of medical cannabis in the world. By
medical cannabis program stems from traditionally progressive cannabis policies
and strong cultural acceptance of cannabis medicinal uses.
The Israeli cannabis sector has been slowed by regulations, which have hindered
Israeli cannabis exports and complicated domestic distribution. There is
currently no mutual recognition agreement between local Medical Cannabis GMP and
EU-GMP, denying many Israeli firms the qualifications necessary to export to
In
cannabis to
exports cannabis to
to German wholesalers.
27 The Kaya™ Family of Brands
KAYS produces, distributes, and/or sells a full range of premium cannabis
products including flower, oils, vape cartridges and cannabis infused
confections, baked goods and beverages through a fully integrated group of
subsidiaries and companies supporting highly distinctive brands.
Currently Operational Brands (2014-2022)
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28
Next Stage Traditional (2023)
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Next Stage Innovative (2023)
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Note: The “Next Stage Traditional” and “Next Stage Innovative” brands are all
targeted for release in 2023.
30 The Kaya Shack™ Brand
retail marijuana retail stores.
marijuana retail outlets and medical marijuana dispensaries in
Kaya Shack™ brand.
Dubbed by the mainstream press as the “Starbucks of Marijuana” after our first
outlet opened in
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
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
replicating its Kaya Shack™ brand retail outlets through franchising in other
states where medial and or recreational cannabis use is legal or expected to
become legal in the near term, as well as in
of KAYS International Expansion Plans. KAYS also is targeting opening corporate
owned marijuana production and processing facilities to support the envisioned
franchised outlets, and to both maintain quality control and offer customers a
consistent customer experience while reducing costs of goods to franchisees.
[[Image Removed]]
31
Kaya Shack™ Retail Outlets
[[Image Removed]]
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 (20-30 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.
32
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The stores also feature standing display cases with cannabis intended glassware
under the Company’s brand Really
t-shirt designs marketed under the Company brand
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.
33
I. Kaya Shack™ ,
[[Image Removed]]
Our first Kaya Shack™ OLCC licensed marijuana store (located in the heart of the
trendy
a cell phone repair shop, and near to Devil’s Dill restaurant and No Fun pub.
There are also a
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.
34
II.
[[Image Removed]]
Our second Kaya Shack™ OLCC licensed marijuana store (located in South
Oregon
mall alongside a Caesar’s Pizza, Aaron’s furniture, a convenience store, a
tanning salon, and a nail salon. The plaza also has 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.
35
Kaya Farms™
[[Image Removed]]
The Company has developed its own proprietary Kaya Farms™ strains of cannabis,
which it has grown and produced at the various medical and recreational grows
that the Company has operated and maintained over the past eight years in
extracts which it has initially produced through third party manufacturers and
marketed at the Kaya Shack Stores, along with the very popular Kaya Buddies line
of strain specific cannabis cigarettes.
The Company currently maintains a genetic library of seeds for over 200 top
strains of cannabis that it has assembled from its own grow operations, contract
growers, vendors for its retail stores and other commercial sources which it
intends to utilize to launch international grow operations in
elsewhere.
As noted elsewhere in this filing, the Company owns a 26-acre farm in
an OLCC Licensed Cannabis grow. Due to a substantial increase in the value of
the farm based on the large amount of acres that it encompasses that are not
relative to cannabis production, the Company has listed the property for sale.
If the property is sold the Company intends to allocate a significant portion of
the proceeds to enhance its Oregon Cannabis Production, Processing and Retail
Footprint, develop its planned Oregon Psilocybin Business Plan and further
develop its international projects.
36
Kaya Buddie™ Strain Specific Cannabis Cigarettes
[[Image Removed]]
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In 2016 the Company introduced a signature line of strain-specific
connoisseur-grade, pre-rolled cannabis cigarettes branded as “Kaya Buddies™”.
Kaya Buddies™ cannabis cigarettes have been very well received by medical
patients and recreational users, with the Company selling over 100,000 Kaya
Buddies™ since launching the brand in
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 pre-rolls made from the buds of the flower.
37Kaya Brands International [[Image Removed]]
After over five years of conducting “touch the plant”
inside the strict regulatory confines of a public company, KAYS has formed
Brands International, Inc.
experience and expand into worldwide cannabis markets. KBI’s current operations
and initiatives include Canada Greece, and Israel, with additional areas under
consideration for
Canada [[Image Removed]]
Canadian Franchising: KAYS has endeavored to launch its franchise program and
growth strategy in
based law firm of
required to enable the Company to sell Kaya Shack™ franchises in
Garfinkle Biderman has since completed the necessary legal work and the Company
is currently in negotiations with different potential development partners to
launch franchised operations in
franchised locations there over the next five years.
Greece [[Image Removed]] 38
Kaya Kannabis is a joint venture project cultivation-for-export cannabis-farming
and processing project of
an
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
We have selected
its amenable cannabis regulations, favorable climate, affordable, capable
workforce, and the country’s position as a major pharmaceutical center in
to KAYS flower and oils, and as permitted, the KAYS portfolio of brands.
On
Farms Greece or “KFG”) and Greekkannabis (“GKC”, an
Company
acquired in January, 2021 and the remaining 25% was acquired in July, 2021.
GKC’s projects include two medical cannabis cultivation and processing projects
in
Kaya Kannabis-
[[Image Removed]]
Site of Epidaurus Land
GKC plans to cultivate and manufacture KAYS proprietary cannabis brands
(CBD/THC) from the
other EU markets as permitted by local regulations.
39
[[Image Removed]]
Interior View- KAYS’ newest project with 50K square feet of already constructed
buildings is designed to fast-track sales of KAYS proprietary branded cannabis products to the EU.
constructed, approximately 50,000 square feet in total under-air space) situated
on 2.8 acres of land, with its own independent industrial electrical power
center and ample water supply to service the needs of the facility.
Epidaurus Project
cultivation, a 15,000 square foot EU-GMP extraction and processing facility, and
a 10,000 square foot EU-GMP packing area. There is ample room for expansion with
room to construct an additional 15,000 square feet on site. The joint venture
has been awarded its development license to from the Greek authorities and is
awaiting project financing to complete the acquisition of the
and complete the installation of EU Certified equipment to gain final licensing
of the facility.
The
proprietary branded cannabis products for distribution in legal EU markets while
awaiting greater legal cannabis demand to emerge prior to developing a
large-scale capacity in
40
Kaya Kannabis-
[[Image Removed]]
Kaya Kannabis Medical Cannabis Production Facility in
Design Rendering)
20,000 sq. meters of light deprivation greenhouses and 60,000 square feet of
structure to be used for storage, laboratory, processing, manufacturing,
logistics, and support/administrative space.
obtained the initial cannabis construction license approvals from Greek
government authorities and is awaiting project financing.
[[Image Removed]]
Situated on 15 acres of land which GKC has contracted to purchase, the
Project
to Grow” should the legal circumstances in a country or region suddenly permit
(i.e., German legalization of recreational cannabis and the subsequent rapid
rise in demand).
provides KAYS the operational flexibility needed to secure and maintain market
position in a rapidly evolving market arena once legal cannabis demand warrants
an increase in capacity.
41
Israel
[[Image Removed]]
[[Image Removed]]
Kaya Shalvah Cannabis Production Facility (Project Design Rendering).
Israel has been a pioneer in cannabis R&D for several decades, and is often
referred to as the “
Israel currently has the world’s largest medical marijuana program and is the
largest importer of cannabis.
There is legislation under Knesset review to permit adult-use cannabis, making
the domestic Israeli market an attractive opportunity. Upon legalization of
adult use cannabis in
permitted, the KAYS portfolio of brands in
market experience and Kaya Shack™ retail shops (through a local franchisee) to
serve the domestic Israeli market, and has begun to target distribution
agreements with the Israeli Pharmaceutical Industry.
We have chosen to become active in the Israeli cannabis market because of this
position as global center of cannabis science, where technologies are
specifically developed to enhance cannabis cultivation processes and yields, and
innovative consumer products are emerging that have potential interest for both
the medical and recreational markets throughout the world.
On
Shalvah has been awarded its initial permit from the “YAKAR”, the
Medical Cannabis
cannabis cultivation and processing facility. This initial permit grants Kaya
Shalvah permission to proceed with its plans to develop commercial scale
cannabis cultivation and processing in
Kaya Shalvah is currently focused on two separate paths of development to launch
its Israel Operations- the first being through participation in the government
sponsored Greenegev Cannabis Ecosystem in Yerucham, Israel and the second path
being through potentially acquiring an interest in currently licensed medical
cannabis production and processing facilities that are already operating in
Greenegev Cannabis Ecosystem, Yerucham, Israel
Under the leadership of its Mayor,
to transform the small desert town into “Greenegev”, the first cannabinoid
ecosystem in
companies to concentrate their respective activities in Yerucham, attracting
services that provide each resident company with core advantages by virtue of
the cooperation and support the ecosystem community is uniquely positioned to
provide. Yerucham has a Development Zone A designation from the Israeli
government, making economic growth in the area a national priority and attaching
a wide range of financial incentives to companies therein establishing
operations.
42
Kaya Shalvah meets all the prescribed criteria and the licensing process is
progressing, with the full support and valuable assistance of the Yerucham
mayor’s office and the municipal staff. Kaya Shalvah is also benefitting from
the support and guidance of Major General (Res.)
mayor and the current chairman of the
[[Image Removed]]
Kaya Shalvah is currently awaiting for the Israeli Government to proceed with
the land tender program (which has been delayed due to COVID 19 issues). Upon
commencement with the bidding program, Kaya Shalvah will submit its land
acquisition bid for 100 Dunams (approximately 25 acres) of land to the
Land Authority
bids that are part of the highly sought after Greenegez Canabis Center in
Yerucham, Israel.
Pending receipt of a successful bid through this program, once Kaya Shalvah
develops the site in accordance with all Israeli regulations, and meets all
requisite standards, the final cultivation and processing licenses will be
issued.
The Company has established a Board of Directors for Kaya Shalvah that includes:
A career fighter pilot in the
tours as a fighter squadron commander, and served as commander of the
Training School
Organization
his military service Offer spent a number of years in senior management
positions at Israel’s leading retailer, as well as CEO of a high-tech start-up,
only to miss flying and return to the skies as a pilot for El Al airlines. After
his mandatory retirement from commercial flying, he joined the El Al executive
team as the Director of Safety and Quality for
his B.A. degree in Economics at
Management from the
Ilan Horesh (Col. Res .)
Ilan was a career Israel Defense Forces officer, retiring in 1993 after 23 years
at the rank of Colonel. During his career Ilan held numerous command positions
with combat ground forces. His final assignment in the IDF was Commander of the
embarked on a career as an executive and leader in the Israeli high tech sector,
working with such companies as
served on the Boards of a number of Israeli companies, including
Systems, Ltd.
Joseph Gayer , Adv.
ZAG-S&W. Yossi is a prominent expert in a number of legal fields, including
commercial litigation and contracts law, representing clients both on domestic
and international matters.
Yossi also represents Israel’s leading professional athletes in all fields of
sports, including advising sports clubs, organizations, and sponsors in
and abroad. His litigation practice has yielded many legal precedents that have
influenced the status of professional athletes, both in
respect to their rights vis-a-vis employers, sports authorities, and various
statutory institutes. Yossi’s expertise includes insurance and property law.
Yossi lectures at the
(IDC)
Gadi Katz
Gadi is the founder of Total Immersion Swimming Israel “TISI”, the Israel
franchise of a multinational corporation in the sports and leisure market. Gadi
has built TISI to a current 70 branches operating across Israel, serving
thousands of clients annually. Since founding TISI in 2006, Gadi has become
expert in online marketing and has development in-house a state of the art
marketing and sales Business Intelligence system. Gadi is also an expert in
business development, specializing in small and mid-sized companies. Prior to
TISI, Gadi was the co-founder and CFO of the American-Israeli Crisis and Issue
Management (AICIM) consulting firm. AICIM specialized in high-level advisory
services to politicians (including candidates for Head of State) and business
leaders globally. Early in his career Gadi practiced law at what is today
Israel’s largest
focused matters such as Venture Capital, IPOs, M&As, Joint Ventures, Spin Offs
and Corporate Restructurings. Gadi holds a B.A. in Business Administration,
Magna Cum Laude, LL.B and an MBA.
43
Kaya Shalvah’s supportive
Uzi Teshuva
Uzi is a second-generation Israeli farmer, active in agriculture since his
teenage years. Since 1991 Uzi has served as the CEO of a farm distributes its
agricultural products, grown using groundbreaking and innovative agricultural
methods. Uzi became the active Chairman of TAP, an agricultural engineering and
technology company specializing in the design, construction and management of
agricultural farms in numerous countries worldwide.
Elon Kaplan , Ph.D.
Elon, a Ph.D. in Organizational Psychology is the Founder and CEO of Cytegic, a
cutting-edge cyber-risk quantification solution predicated on the idea that
enterprise risk is a combination of three key elements: technology, people, and
business. Cytegic was recently sold to MasterCard. Elon brings to Kaya Shalvah
the guidance of a serial entrepreneur, a scientist and a cyber-security expert.
As a business leader, he excels at building exceptional teams and driving
innovative breakthroughs. As an applied behavioral scientist, he is trained in
specific modeling and statistical methodologies. Prior to Cytegic, Elon was
Founder and CEO of
consultancy, where he worked with many large companies, including PayPal, El-Al,
Johnson & Johnson,
and Comverse.
Rafi Cohen
Rafi is the Israeli Chief of Operations for
overseen small and large-scale cannabis research & development projects since
2015, specializing in medicinal, cosmetic , wellness and animal health product
development. For the past five years, Rafi has been dedicated exclusively to
working within the emerging Israeli and global cannabis industry, recognizing
the commercial and medicinal potential of cannabis. Rafi has distinctive
experience in cannabis research projects, product development, clinical studies,
investments, and joint ventures. Rafi began his career as a corporate attorney
with
corporate development. Later he was a founding partner at
Associates
Josh Rubin
Josh is the founder and CEO of
Colorado
cannabis industry by introducing Israeli cannabis related innovations to the
North American and global markets. Josh began his career in the cannabis
industry in 2017 as a consultant analyzing trends in the cannabis market.
Recognizing the opportunity to bridge the North American and Israeli cannabis
sectors, he launched DTL. Josh was well suited to establish DTL, for in addition
to his extensive network in
and working in
the Knesset, and worked for the
a researcher. Josh even found time to volunteer as a medic for
Josh has a Masters of Business Administration from
(Marketing), a Masters Degree from IDC in Government and a Bachelor of Arts
Degree from
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.
44
Our foreign operations will also be subject to comparable government regulation
in
intends to operate.
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
part-time store employees including budtenders, trimmers, growers, and 4
full-time employees, consisting of the Senior Vice President of Cannabis
Operations, the Vice President of Marketing and Brand development, and 2 store
managers. Additionally, we engage several consultants to assist with daily
duties and business plan implementation and execution. Additional employees will
be hired and other consultants engaged in the future as our business expands.
Potential Effects of the COVID-19 Pandemic on our Business
The adverse public health developments and economic effects of the COVID-19
pandemic in
customers and suppliers as a result of quarantines, facility closures and
logistics restrictions in connection with the outbreak. More broadly, the
COVID-19 pandemic could potentially lead to an extended economic downturn, which
would likely decrease spending, adversely affect demand for our products and
services, slow our international expansion plans, harm our business, results of
operations and financial condition. The Company cannot accurately predict the
effect the COVID-19 pandemic will have on the Company.
45 Results of Operations
Three months ended
30, 2021
Revenues
We had revenues of
compared to revenues of
Cost of Goods Sold
Our cost of goods sold for the three months ended
Salaries and Wages
Salaries and Wages increased to
2022
Selling, General and Administrative Expenses
Selling, general and administrative decreased to
ended
Professional Fees
Professional fees were
as compared to
Gain or Loss on Impairment of Assets
Gain on impairment of assets was
2022
Interest Expense
Interest expense and debt amortization expense increased slightly to
three months ended
Amortization of Debt Discount
Amortization of debt discount was
30, 2022
Derivative Liabilities Expense
Derivative liabilities expense
from
Change in Fair Value of Embedded Derivative Liabilities
Change in fair value of embedded derivative liabilities was an expense of
to change in stock price as well as the volatility factors used in the
derivative calculations.
46 Other Income (Expense)
Other expense was
compared to income of
The increased loss was due largely to a change in derivative liability expenses
resulting from a change in stock price as well as the volatility factors used in
the derivative calculations.
Net Income (Loss)
We incurred net loss of
as compared to net income of
2021
30, 2022
convertible debt and a reduction in our stock price as well as volatility
factors used in the derivative calculations. The non-controlling interest for
the three months ended
loss of
Nine months ended
Revenues
We had revenues of
compared to revenues of
The slight decrease in revenue is due to the normal fluctuation in the market
and we are evaluating the changing market conditions.
Cost of Goods Sold
Our cost of goods sold for the nine months ended
compared to cost of goods sold of
30, 2021
the wholesale cannabis market and lower revenues.
Salaries and Wages
Salaries and Wages were
compared to
in salaries and wages was due to an increase in staffing.
Selling, General and Administrative Expenses
Selling, general and administrative increased to
ended
office expenses.
Professional Fees
Professional fees were
compared to
in professional fees was primarily related to decreases in expenses for
accounting, auditing and consulting.
Interest Expense
Interest expense and debt amortization expense decreased to
months ended
12 months for our operations.
Amortization of Debt Discount
Amortization of debt discount was
30, 2022
47
Derivative Liabilities Expense
Derivative liabilities expense decreased to
The decrease was due to change in stock price as well as a reduction in new
convertible debt.
Change in Fair Value of Embedded Derivative Liabilities
Change in fair value of embedded derivative liabilities was an expense increase
to
to change in stock price as well as the volatility factors used in the
derivative calculations.
Net Income attributed to
We had net loss of
compared to net income of
2021
The majority of our net loss during the nine months ended
a result of the derivative liabilities associated with our convertible debt and
a reduction in our stock price as well as the less volatility factors used in
the derivative calculations. The non-controlling interest for the nine months
ended
Liquidity and Capital Resources
During the third quarter of 2022 our cash position decreased by
As of
inventories of
30, 2021
Our current liabilities include accounts payable and accrued expenses of
accrued interest of
potential tax liability of
of
compared to accounts payable and accrued expenses of
and accrued expenses-related parties of
current portion of lease liability of
48 Financing Transactions
Release of Lien on
On
International, Inc.
Promissory Notes of the Company, one of which had been also been secured by a
CVC has agreed to release its mortgage lien of
secures the above-referenced Convertible Promissory Note held by CVC so that the
Company may sell the Property and utilize the proceeds for the benefit of the
Company without having to pay CVC the
remains outstanding and is due per the terms of the Note. Additionally, CVC
agreed to advance certain sums against the sale of the Property, as detailed
below in “New Notes Issued”.
Per the terms of the Agreement the Company will utilize the funds for the
following purposes:
development of the Psilocybin business plan,
enhancement and upgrading of KAYS’ Oregon Cannabis Retail and Production
Footprint,
potential filing of cannabis licensing applications elsewhere in
States
further development of the Company’s international projects,
general corporate and public company expenses including but not limited to the
payment of professional fees to its consultants, accounting and legal service
providers as well as to engage in a market awareness campaign.
In consideration of the release of lien on the Property the Company agrees to
reduce the Conversion Prices of the outstanding notes to be consistent with the
Note entered into on
option to invest in the to-be-formed Psilocybin Subsidiary at a preferential
rate to what it expects to offer to new investors.
The above referenced Agreement is in process of being memorialized.
New Notes Issued
CVC advanced
issued
The Note is Due the earlier of
is secured by a Mortgage on the Property.
Additionally, CVC advanced
Promissory Note issued
adjustment features. The Note is Due the earlier of
Property is sold and is secured by a Mortgage on the Property.
Use of Proceeds
The proceeds from financing transactions that the Company may enter into will be
used to fund our growth plan, including the development, operation and expansion
of our Kaya Shack™ and Kaya Farms™ operations in
new Kaya Shack™ branded cannabis products, the development of our planned Oregon
Psilocybin Business Plan and the groundwork required to initiate our planned
expansion through
Plan of Operations
Management believes that further proceeds expected to be received from financing
transactions that it is seeking to enter into, combined with existing and
anticipated revenues, will alleviate the Company’s financial difficulties to a
significant extent and will allow the Company to meet its anticipated working
capital needs for a period of between twelve and eighteen months from the date
of this report. However, there can be no assurance that further funding from the
contemplated financings will be achieved, or if achieved that they will be
successful to the level required to meet the Company’s cash needs, or that
management’s belief will be correct and that the Company will not sooner require
additional financing to meet its working capital needs prior to achieving
profitability or positive cash flow. Moreover, we may not be successful in
raising additional capital on commercially reasonable terms, if and when needed,
in which case our business, financial condition, cash flows and results of
operations may be materially and adversely affected.
Note Conversions
No notes were converted during the period.
Employee Stock Plan Issuances and Director and Officer Restricted Stock
issuances
No Employee Stock Plan Issuances or Director and Officer Restricted Stock
Issuances were issued during the period.
49
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