KAYA HLDGS INC COM USD0.001 (OTCMKTS:KAYS) Has A Path Forward, Despite Licensing Issues

One of the companies that we have been following closely in the recreational and medicinal cannabis space over the last six months is KAYA HLDGS INC COM USD0.001 (OTCMKTS:KAYS). The company dispenses cannabis products out of what it refers to as the Kaya Shack, currently located in Portland, Oregon, and has, as late, been touting what looked to be a pretty aggressive expansion plan. The plan is designed to launch the company into the expanding recreational spaces in a number of US states (those that have now rendered recreational cannabis legal on the back of early November ballots), and much of the company's value increase recently has been attributable to market anticipation of what impact this expansion would have on 2017 revenues, when compared to 2016.Kaya management announced mid December that it would be holding a conference call, and the call took place on December 20. In anticipation of some positive news, the company's market capitalization started to appreciate, and it looked like the company was set for a strong end to 2017.Instead, what we saw was a classic buy the rumor sell the fact play. Management announced on the call (well, not so much announced, but noted) that the company didn’t have the necessary licenses to start retailing recreational cannabis through its outlets in Oregon, and of four planned outlets, only two have the necessary licensing in place to allow it to sell medical marijuana in the state.As the call took place, the company took a hit. It's currently trading at $0.27, versus a pre-conference call close of $0.39, so not a massive hit (circa 30%) but not what shareholders were looking to carry into 2017.The question now, is what's next?In Oregon, the license required to sell recreational marijuana is an approval from the Oregon Liquor Control Commission (OLCC). The OLCC sets deadlines by which a retailer's applications need to be in place for the following year, and from management's brief touching on the subject, it seems the company missed the deadline for filing. This means, then, that heading into the year, the company is going to be relying on just two stores' worth of medical marijuana sales to support itself. It's not ideal, but it's not terminal. At least, not right away. It's all going to depend on how quick Kaya can get medical licenses in place at its two other stores (it's probably going to have to go to court to get these licenses, just as it had to with its previous two approved stores) and then the recreational licenses in all four.Right now, there's not really been any sort of time frame offered. The assumption (from the way management addressed the situation on the call) is that the missing of the 2017 deadline doesn’t mean Kaya has to wait until 2018 to sell recreationally. If that was the case, we expect the company's market cap would have fallen considerably farther than it did.There's some potential dilution on the cards by way of some convertibles, and so this is an factor. The company is going to gain considerably on the approval and licensing, so if it can get these in place before the dilution hits, then there's plenty of room for upside on a recovery play. If the dilution is going to come sooner rather than later, it is probably better to hold and play this one once the capital structure clears a little.Either way, we still think there's potential here as a longer term holding. This is a popular, established brand in a recreational state, and that in itself holds a lot of water when it comes to valuation. We just need management to pull together and get through this licensing mess before this value starts to realize.We will be updating our subscribers as soon as we know more. For the latest updates on KAYS, sign up below!Disclosure: We have no position in KAYS and have not been compensated for this article.