10-Q: Kaya Holdings Shifts Focus to Psychedelics & Crypto Amidst Deep Losses

Kaya Holdings reported a significantly increased net loss for the nine months ended September 30, 2025, driven by non-cash derivative expenses, while strategically exiting its cannabis operations to focus on psychedelic treatments and digital assets.

Summary

• Kaya Holdings reported a net loss of $12,774,232 for the nine months ended September 30, 2025, a substantial increase from $3,243,797 in the prior year period.
• The increased loss was primarily due to $10,985,435 in non-cash expenses from changes in the fair value of derivative liabilities, largely stemming from the conversion of outstanding convertible debt.
• The company has fully exited its retail marijuana business (MJAI), which was classified as a discontinued operation, and sold its last OLCC Cannabis Retailer License for $75,000 in Q3 2025.
• Strategic focus has shifted to psychedelic treatment projects through Fifth Dimension Therapeutics (FDT) and the newly formed Kaya Crypto Operations, Inc. for digital assets.
• Cash and equivalents decreased to $26,087 as of September 30, 2025, from $39,668 at December 31, 2024.
• Working capital deficiency improved to $2,422,383 from $8,035,323, largely due to the conversion of convertible debt and related party debt forgiveness.
• Total liabilities significantly decreased to $2,919,815 from $17,344,501, primarily due to the conversion of substantially all outstanding convertible notes into common stock.
• An aggregate of 607,534,390 common shares were issued at $0.02 per share to settle convertible notes, leading to significant shareholder dilution.
• Accrued compensation balances totaling $1,363,733 with CEO Craig Frank and consultant William David Jones were settled through $400,000 in common stock issuance and $1,121,773 in debt forgiveness.
• The company's psilocybin treatment center, 'The Sacred Mushroom' in Portland, Oregon, began administering treatments in July 2024 but terminated its lease effective October 31, 2025, now placing clients at local centers.

Sentiment

Score: 2

Explanation: The company faces severe financial distress with a significantly increased net loss and ongoing going concern doubts. While strategic shifts into psychedelics and crypto offer potential long-term upside, they are highly speculative and early-stage, and the company's current financial position is extremely weak, marked by heavy dilution and low cash reserves. Governance issues further compound the negative sentiment.

Positives

• Total liabilities decreased significantly from $17,344,501 to $2,919,815, primarily due to the conversion of convertible debt into equity.
• Working capital deficiency improved from $8,035,323 to $2,422,383, reducing immediate liquidity pressure.
• Operating loss from continuing operations decreased to $637,132 for the nine months ended September 30, 2025, from $1,622,165 in the prior year.
• The company successfully sold its last remaining OLCC Cannabis Retailer License for $75,000, completing its exit from the cannabis retail market.
• The psychedelic treatment center, 'The Sacred Mushroom,' commenced operations and administered psilocybin treatments, marking progress in a new strategic area.

Negatives

• Net loss from continuing operations significantly increased to $12,773,109 for the nine months ended September 30, 2025, from $3,024,925 in the prior year.
• A substantial non-cash expense of $10,985,435 was recognized from changes in the fair value of derivative liabilities.
• Cash and equivalents declined to $26,087, indicating continued low liquidity.
• Basic net loss per common share worsened to $(0.16) from $(0.13) for the nine months ended September 30, 2025.
• Significant shareholder dilution occurred with the issuance of 607,534,390 common shares for debt conversions and 20,000,000 shares for compensation settlements.
• The company terminated the lease for its Portland psilocybin treatment facility, 'The Sacred Mushroom,' effective October 31, 2025, after only a few months of operation.
• The company remains dependent on its ability to raise additional capital to fund operations and achieve profitability, raising substantial doubt about its going concern ability.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and dependence on external capital.
• The company's ability to raise additional capital on commercially reasonable terms is uncertain, which could materially and adversely affect its business.
• The new psychedelic and cryptocurrency ventures are early-stage and subject to significant commercialization and market success uncertainties.
• Prior tax periods related to cannabis operations remain subject to audit, and Section 280E of the IRS Code could disallow historical deductions.
• The company lacks an audit committee and proper segregation of duties for financial statement preparation, posing internal control risks.
• The volatility of the company's common stock can lead to significant non-cash expenses related to derivative liabilities.
• Competition in the emerging psychedelic and digital asset markets could impact future performance.

Future Outlook

Management believes that further proceeds from anticipated financing transactions, combined with existing and expected revenues, will alleviate financial difficulties and meet working capital needs for 12-18 months. The company intends to seek additional capital through private offerings of equity and/or debt securities. There is no assurance that funding will be achieved or sufficient to meet cash needs or achieve profitability.

Management Comments

• 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.
• We are conducting ongoing discussions with cryptocurrency foundations and other entities/individuals through our representatives to develop a strategy for becoming a Digital Assets Treasury Company (DATCO).
• The company is seeking to develop a joint venture with one or more of the top 200+/crypto currencies as ranked by market cap, preferably on the Solana, Ethereum, or Polygon Networks.
• We are currently placing clients at local Psilocybin Service Centers in Portland that rent out rooms for sessions to licensed facilitators, following the termination of our Portland facility lease.
• We are pursuing seeking to utilize our OHA Psilocybin Service Center License to enter into cooperation agreements with select pharmaceutical companies seeking access to data and a facility to host their trials.

Industry Context

Kaya Holdings is undergoing a significant strategic pivot, exiting the highly regulated and competitive U.S. cannabis retail market to focus on the nascent and speculative psychedelic treatment and cryptocurrency sectors. The move into psychedelics aligns with growing interest in alternative mental health therapies, while the foray into digital assets positions the company in a volatile but potentially high-growth area. This shift moves the company from a mature, albeit challenging, industry to two emerging industries with significant regulatory, market, and technological uncertainties. The termination of the Portland psilocybin facility lease suggests a flexible, asset-light approach to the psychedelic business, potentially leveraging partnerships rather than direct ownership of physical centers.

Comparison to Industry Standards

• NA The filing does not provide specific industry benchmarks or comparable company data for its new psychedelic treatment or cryptocurrency operations. Given the early stage and niche nature of these new ventures, direct comparisons to established industry standards are not readily available within the document.

Management Changes

Corporate Governance

Legal Proceedings

• The company reached a settlement agreement with P3 Distributing L.L.C. on October 17, 2024, requiring monthly payments of $300 for 18 months and a balloon payment of $11,779, totaling $17,179. The lawsuit will be dismissed without prejudice if payments are timely.

Related Party Transactions

• The remaining $250,000 principal balance of a non-convertible note with an affiliated shareholder (Ilan Sarid) was settled and converted into common stock as of September 30, 2025.
• Accrued compensation balances totaling $1,363,733 with Craig Frank (CEO) and William David Jones (consultant) were settled; $400,000 was converted into 20,000,000 common shares, and $1,121,773 was forgiven by the parties.
• 1,000,000 shares of common stock were issued to FDT Oregon 1 LLC owners (related parties) to acquire the remaining 51% equity interest of FDT Oregon 1 LLC after January 1, 2025.
• As of September 30, 2025, $138,227 was due to Bruce Burwick for consulting services.

Stakeholder Impact

• Shareholders experienced significant dilution due to the issuance of over 600 million common shares for debt conversions and compensation settlements.
• Creditors (convertible noteholders) converted substantial debt into equity, reducing the company's debt burden but shifting risk to equity holders.
• Employees and consultants (Craig Frank, William David Jones) settled accrued compensation, receiving shares and forgiving a significant portion of debt.
• Customers of the former cannabis retail business are no longer served as operations have ceased.
• Potential customers for psychedelic treatments may be impacted by the termination of the Portland facility lease, with services now being placed at local centers.

Next Steps

• Evaluate potential sale opportunities for remaining assets of Marijuana Holdings Americas, Inc. (MJAI) in 2025.
• Pursue project financing to complete the Epidaurus Project in Greece for cannabis cultivation and processing.
• Seek to utilize the OHA Psilocybin Service Center License to enter into cooperation agreements with select pharmaceutical companies for trials.
• Develop, launch, and implement a Digital Assets Treasury Company (DATCO) strategy and related cryptocurrency operations through Kaya Crypto Operations, Inc.
• Conduct ongoing discussions with cryptocurrency foundations and other entities/individuals for potential joint ventures.
• Engage in dialogue with entities in Grand Cayman for potential investment in the cryptocurrency subsidiary and access to trading/service platforms.
• Raise additional capital through private offerings of equity and/or debt securities to fund operations and expansion.
• Establish an audit committee and improve segregation of duties for financial reporting to address internal control deficiencies.
• Develop a formal written policy for the approval, identification, and authorization of related party transactions.

Key Dates

Recommendation

Kaya Holdings presents an extremely high-risk investment profile. The company reported a significantly increased net loss, indicating worsening financial performance, and continues to operate with a substantial working capital deficiency, raising serious going concern doubts. While the strategic pivot to psychedelics and cryptocurrency is ambitious, both sectors are highly speculative, and the company's execution in these new areas is in its very early stages, with the Portland psychedelic facility lease already terminated. The massive dilution from recent debt-to-equity conversions, coupled with ongoing liquidity issues and identified corporate governance deficiencies (lack of audit committee, poor segregation of duties), makes the stock highly unattractive. The reliance on future capital raises in such a precarious financial state further exacerbates the risk for investors. A seasoned investor would likely view this as a distressed asset with significant downside potential.

Keywords

Kaya Holdings, KAYS, 10-Q, Quarterly Report, Psychedelic Treatment, Digital Assets, Cryptocurrency, Cannabis Exit, Going Concern, Convertible Debt, Derivative Liabilities, Share Dilution, Financial Results, SEC Filing, Oregon Health Authority, The Sacred Mushroom