UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-Q
(Mark
One)
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the quarterly period ended |
March
31, 2020 |
|
or
[ ] |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For
the transition period from |
|
to |
|
|
Commission
File Number |
000-55594 |
|
INDOOR
HARVEST CORP |
(Exact
name of registrant as specified in its charter) |
Texas |
|
45-5577364 |
(State
or other jurisdiction of incorporation or organization) |
|
(IRS
Employer Identification No.) |
7401
W. Slaughter Lane #5078
Austin,
Texas
|
|
78739 |
(Address
of principal executive offices) |
|
(Zip
Code) |
512-309-1776 |
(Registrant’s
telephone number, including area code) |
N/A |
(Former
name, former address and former fiscal year, if changed since last
report) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s)
|
|
Name
of each exchange on which registered |
|
|
|
|
|
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 (Section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes [X] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer |
[ ] |
Accelerated
filer |
[ ] |
Non-accelerated
filer |
[ ] |
(Do
not check if a smaller reporting company) |
Smaller
reporting company |
[X] |
|
|
|
Emerging
growth company |
[X] |
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
[ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act)
[ ]
YES [X] NO
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date: 273,323,266 common
shares issued and outstanding as of March 31, 2020.
TABLE
OF CONTENTS
FORWARD-LOOKING
STATEMENTS
Except
for any historical information contained herein, the matters
discussed in this quarterly report on Form 10-Q contain certain
“forward-looking statements’’ within the meaning of the federal
securities laws. This includes statements regarding our future
financial position, economic performance, results of operations,
business strategy, budgets, projected costs, plans and objectives
of management for future operations, and the information referred
to under “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.”
These
forward-looking statements generally can be identified by the use
of forward-looking terminology, such as “may,” “will,” “expect,”
“intend,” “estimate,” “anticipate,” “believe,” “continue” or
similar terminology, although not all forward-looking statements
contain these words. These forward-looking statements are not
historical facts, and are based on current expectations, estimates
and projections about our industry, management’s beliefs and
certain assumptions made by management, many of which, by their
nature, are inherently uncertain and beyond our control.
Accordingly, you are cautioned that any such forward-looking
statements are not guarantees of future performance and are subject
to certain risks, uncertainties and assumptions that are difficult
to predict. Although we believe that the expectations reflected in
such forward-looking statements are reasonable as of the date made,
expectations may prove to have been materially different from the
results expressed or implied by such forward-looking statements.
Important factors that may cause actual results to differ from
projections include, for example:
|
● |
the
success or failure of management’s efforts to implement our
business plan; |
|
● |
our
ability to fund our operating expenses; |
|
● |
our
ability to compete with other companies that have a similar
business plan; |
|
● |
the
effect of changing economic conditions impacting our plan of
operation; and |
|
● |
our
ability to meet the other risks as may be described in future
filings with the Securities and Exchange Commission (the
“SEC”). |
Unless
otherwise required by law, we also disclaim any obligation to
update our view of any such risks or uncertainties or to announce
publicly the result of any revisions to the forward-looking
statements made in this quarterly report on Form 10-Q.
When
considering these forward-looking statements, you should keep in
mind the cautionary statements in this quarterly report on Form
10-Q and in our other filings with the SEC. We cannot assure you
that the forward-looking statements in this quarterly report on
Form 10-Q will prove to be accurate. Furthermore, if our
forward-looking statements prove to be inaccurate, the inaccuracy
may prove to be material. In light of the significant uncertainties
in these forward-looking statements, you should not regard these
statements as a representation or warranty by us or any other
person that we will achieve our objectives and plans in any
specified time-frame, or at all.
PART I - FINANCIAL
INFORMATION
Item 1. |
Financial
Statements |
INDOOR
HARVEST CORP
CONSOLIDATED
BALANCE SHEETS
(UNAUDITED)
|
|
March
31, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash
and cash equivalents |
|
$ |
2,852 |
|
|
$ |
12,353 |
|
Prepaid
expenses |
|
|
- |
|
|
|
5,331 |
|
Total Current Assets |
|
|
2,852 |
|
|
|
17,684 |
|
|
|
|
|
|
|
|
|
|
Furniture and equipment, net |
|
|
3,053 |
|
|
|
4,615 |
|
Intangible asset, net |
|
|
2,312 |
|
|
|
2,690 |
|
TOTAL
ASSETS |
|
$ |
8,217 |
|
|
$ |
24,989 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable
and accrued expenses |
|
$ |
466,977 |
|
|
$ |
399,710 |
|
Due to related
party |
|
|
100 |
|
|
|
100 |
|
Convertible notes
payable, net of debt discount of $6,408 and $20,826,
respectively |
|
|
894,349 |
|
|
|
897,828 |
|
Derivative
liability |
|
|
4,551,708 |
|
|
|
3,029,748 |
|
Note
payable - current portion |
|
|
2,031 |
|
|
|
3,694 |
|
Total Current
Liabilities |
|
|
5,915,165 |
|
|
|
4,331,080 |
|
|
|
|
|
|
|
|
|
|
Total
Liabilities |
|
|
5,915,165 |
|
|
|
4,331,080 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
Preferred stock: 5,000,000 authorized;
$0.01 par value Series A Convertible Preferred stock: 5,000,000
designated, 750,000 shares issued and outstanding at March 31,
21020 and December 31, 2019 |
|
|
7,500 |
|
|
|
7,500 |
|
Common stock: 3,000,000,000
authorized; $0.001 par value; 273,323,266 and 201,037,304 shares
issued and outstanding at March 31, 2020 and December 31, 2019,
respectively |
|
|
273,324 |
|
|
|
201,038 |
|
Additional paid in capital |
|
|
10,438,066 |
|
|
|
10,377,256 |
|
Accumulated
deficit |
|
|
(16,625,838 |
) |
|
|
(14,891,885 |
) |
Total
Stockholders’ Deficit |
|
|
(5,906,948 |
) |
|
|
(4,306,091 |
) |
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
8,217 |
|
|
$ |
24,989 |
|
The
accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Revenue |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Operating
Expenses |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
- |
|
|
|
2,942 |
|
Professional
fees |
|
|
127,150 |
|
|
|
141,099 |
|
General and administrative |
|
|
4,679 |
|
|
|
142,022 |
|
Total Operating Expenses |
|
|
131,829 |
|
|
|
286,063 |
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(131,829 |
) |
|
|
(286,063 |
) |
|
|
|
|
|
|
|
|
|
Other Income
(Expense) |
|
|
|
|
|
|
|
|
Other income |
|
|
- |
|
|
|
- |
|
Interest income
(expense) |
|
|
(41,165 |
) |
|
|
9,294 |
|
Amortization of
debt discount |
|
|
- |
|
|
|
(14,418 |
) |
Change in fair value of embedded derivative liability |
|
|
(1,560,959 |
) |
|
|
(223,655 |
) |
Total other
expense |
|
|
(1,602,124 |
) |
|
|
(228,779 |
) |
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(1,733,953 |
) |
|
|
(514,842 |
) |
Provision for income taxes |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
$ |
(1,733,953 |
) |
|
$ |
(514,842 |
) |
|
|
|
|
|
|
|
|
|
Basic and
dilutive loss per common share |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
Weighted average number of common
shares outstanding |
|
|
208,233,694 |
|
|
|
36,951,822 |
|
The
accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ DEFICIT
(UNAUDITED)
|
|
Series A Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Number of
Shares |
|
|
Amount |
|
|
Number of
Shares |
|
|
Amount |
|
|
Paid in Capital |
|
|
Accumulated Deficit |
|
|
Stockholders’
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31,
2019 |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
|
201,037,304 |
|
|
$ |
201,038 |
|
|
$ |
10,377,256 |
|
|
$ |
(14,891,885 |
) |
|
$ |
(4,306,091 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
issued for services - third party |
|
|
- |
|
|
|
- |
|
|
|
2,021,006 |
|
|
|
2,021 |
|
|
|
70,899 |
|
|
|
- |
|
|
|
72,920 |
|
Common stock
issued for services - related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Convertible debt
converted into common stock |
|
|
- |
|
|
|
- |
|
|
|
70,264,956 |
|
|
|
70,265 |
|
|
|
(49,088 |
) |
|
|
- |
|
|
|
21,177 |
|
Derivative
liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
38,999 |
|
|
|
- |
|
|
|
38,999 |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,733,953 |
) |
|
|
(1,733,953 |
)) |
Balance -
March 31, 2020 |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
|
273,323,266 |
|
|
$ |
273,324 |
|
|
$ |
10,438,066 |
|
|
$ |
(16,625,838 |
) |
|
$ |
(5,906,948 |
) |
|
|
Series A Convertible |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional |
|
|
|
|
|
Total |
|
|
|
Number of Shares |
|
|
Amount |
|
|
Number of Shares |
|
|
Amount |
|
|
Paid in Capital |
|
|
Accumulated Deficit |
|
|
Stockholders’ Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - December 31,
2018 |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
|
34,888,415 |
|
|
$ |
34,888 |
|
|
$ |
9,299,988 |
|
|
$ |
(11,795,064 |
) |
|
$ |
(2,452,688 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services -
third party |
|
|
|
|
|
|
|
|
|
|
790,249 |
|
|
|
791 |
|
|
|
32,827 |
|
|
|
- |
|
|
|
33,618 |
|
Common stock
issued for services – related party |
|
|
- |
|
|
|
- |
|
|
|
129,012 |
|
|
|
129 |
|
|
|
6,050 |
|
|
|
- |
|
|
|
6,179 |
|
Convertible debt
converted into common stock |
|
|
- |
|
|
|
- |
|
|
|
2,898,278 |
|
|
|
2,898 |
|
|
|
63,629 |
|
|
|
- |
|
|
|
66,527 |
|
Derivative
liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
143,937 |
|
|
|
- |
|
|
|
143,937 |
|
Beneficial
conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(514,842 |
) |
|
|
(514,842 |
) |
Balance -
March 31, 2019 |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
|
38,705,954 |
|
|
$ |
38,706 |
|
|
$ |
9,546,431 |
|
|
$ |
(12,309,906 |
) |
|
$ |
(2,717,269 |
) |
The
accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Three
Months Ended |
|
|
|
March 31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(1,733,953 |
) |
|
$ |
(514,842 |
) |
Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and
amortization expense |
|
|
1,940 |
|
|
|
2,942 |
|
Amortization of
debt discount |
|
|
17,697 |
|
|
|
14,418 |
|
Change in fair
value of embedded derivative liability |
|
|
1,560,959 |
|
|
|
223,655 |
|
Stock issued for
services - third party |
|
|
72,920 |
|
|
|
33,618 |
|
Stock issued for
services - related party |
|
|
- |
|
|
|
6,179 |
|
Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
|
- |
|
|
|
- |
|
Prepaid
expenses |
|
|
5,331 |
|
|
|
18,370 |
|
Accounts payable
and accrued expenses |
|
|
67,268 |
|
|
|
73,927 |
|
Deferred rent |
|
|
- |
|
|
|
(1,370 |
) |
Accrued compensation - officers |
|
|
- |
|
|
|
(3,722 |
) |
Net
Cash used in Operating Activities |
|
|
(7,838 |
) |
|
|
(146,825 |
) |
|
|
|
|
|
|
|
|
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
Repayments of note payable |
|
|
(1,663 |
) |
|
|
(2,003 |
) |
Net
Cash used in Financing Activities |
|
|
(1,663 |
) |
|
|
(2,003 |
) |
|
|
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
(9,501 |
) |
|
|
(148,828 |
) |
Cash and cash
equivalents, beginning of period |
|
|
12,353 |
|
|
|
155,682 |
|
Cash and cash
equivalents, end of period |
|
$ |
2,852 |
|
|
$ |
6,854 |
|
|
|
|
|
|
|
|
|
|
Supplemental Cash
Flow Information |
|
|
|
|
|
|
|
|
Cash
paid for interest |
|
$ |
- |
|
|
$ |
1,742 |
|
Cash
paid for taxes |
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-Cash Investing
and Financing Activities: |
|
|
|
|
|
|
|
|
Beneficial conversion feature |
|
$ |
- |
|
|
$ |
- |
|
Settlement of convertible note into common shares |
|
$ |
- |
|
|
$ |
- |
|
Conversion of convertible note into common shares |
|
$ |
21,177 |
|
|
$ |
66,527 |
|
Conversion of
preferred shares into common shares |
|
$ |
- |
|
|
$ |
- |
|
Derivative liability reclassified to paid-in capital |
|
$ |
38,999 |
|
|
$ |
143,937 |
|
The
accompanying notes are an integral part of these unaudited
consolidated financial statements.
INDOOR
HARVEST CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature
of Operations and Organization
Indoor
Harvest Corp (the “Company,”) is a Texas corporation formed on
November 23, 2011. Our principal executive office is located at
7401 W. Slaughter Lane #5078, Austin, Texas 78739. On August 3,
2017, we formed Alamo Acquisition, LLC, a wholly owned Texas
limited liability company (“Alamo Acquisition Sub”). On August 4,
2017, we consummated a business acquisition (the “Alamo
Acquisition”) pursuant to which Alamo Acquisition Sub acquired all
of the outstanding member interests of Alamo CBD, LLC. (“Alamo
CBD”), a Texas limited Liability Company. Upon closing of the Alamo
Acquisition, the member interests of Alamo CBD were exchanged for
7,584,008 shares of Indoor Harvest’s common stock, the parent
company of Alamo Acquisition Sub, and Alamo CBD continued as our
surviving wholly-owned subsidiary, and Alamo Acquisition Sub ceased
to exist. Pursuant to ASC 805 “Business Combinations,” the
Company determined the Alamo Acquisition was an asset
purchase.
From
inception until August 4, 2017, the Company pursued full service,
state of the art design-build, engineering, procurement and
construction services to the indoor and vertical farming industry.
The Company pursued providing production platforms, mechanical
systems and complete custom designed build outs for both Controlled
Environment Agriculture (“CEA”) and Building Integrated Agriculture
(“BIA”), for two unique industries, produce and cannabis. In
mid-2016, the Company began efforts to separate its produce and
cannabis related operations due to ongoing feedback from both
clients and potential institutional investors. It was determined
that the Company’s involvement in the cannabis industry was
creating conflicts for clients and potential institutional
investors wishing to work with the Company from the produce
industry due to the public perception and political issues
surrounding the cannabis industry. By late-2016, the Company had
decided to cease its products and services to the vertical farming
industry and to focus on utilizing the Company’s developed
technology and methods for the cannabis industry. On August 4,
2017, the Company ceased actively supporting business development
of vertical farms for produce production.
On
August 14, 2019, the Company established a wholly owned subsidiary,
IHC Consulting, Inc. (“IHC”), in the State of New York of the
United States of America. IHC Consulting may provide consulting and
other services to the Company and others on a contracted
basis.
The
current strategy is to position the Company as an integrated
consolidation platform offering for cannabis industry companies
focused on hemp, other hemp-related products, CBD, with the
potential to be part of a bigger opportunity while sharing
intellectual capital, technology, expanded business networks, along
with access to new capital markets and liquidity for
investors.
The
Company’s operational expenditures will be focused on plans to
create shareholder value through an M&A and strategic
partnership strategy, while managing the necessary costs related to
being a fully reporting company with the SEC.
COVID-19
A
novel strain of coronavirus (COVID-19) was first identified in
December 2019, and subsequently declared a global pandemic by the
World Health Organization on March 11, 2020. As a result of the
outbreak, many companies have experienced disruptions in their
operations and in markets served. The Company has instituted some
and may take additional temporary precautionary measures intended
to help ensure the well-being of its managers and minimize business
disruption. The Company considered the impact of COVID-19 on the
assumptions and estimates used and determined that there were no
material adverse impacts on the Company’s results of operations and
financial position at March 31, 2020 other than material delays in
pursuing its plans. The full extent of the future impacts of
COVID-19 on the Company’s operations is uncertain. A prolonged
outbreak could have a material adverse impact on financial results
and business operations of the Company, including the timing and
ability of the Company to develop its business plan.
Basis
of Presentation
The
accompanying financial statements have been prepared on the accrual
basis of accounting in accordance with accounting principles
generally accepted in the United States of America
(“GAAP”).
It is
management’s opinion, however, that all material adjustments
(consisting of normal and recurring adjustments) have been made
which are necessary for a fair financial statement presentation.
The results for the interim period are not necessarily indicative
of the results to be expected for the year.
Reclassification
Certain
amounts from prior periods have been reclassified to conform to the
current period presentation.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Significant
estimates include, but are not limited to, the estimate of
percentage of completion on construction contracts in progress at
each reporting period which we rely on as a primary basis of
revenue recognition, estimated useful lives of equipment for
purposes of depreciation and the valuation of common shares issued
for services, equipment and the liquidation of
liabilities.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiary. All significant
inter-company accounts and transactions have been eliminated in
consolidation.
Loss
per Share
Basic
earnings (loss) per share amounts are calculated based on the
weighted average number of shares of common stock outstanding
during each period. Diluted earnings (loss) per share is based on
the weighted average numbers of shares of common stock outstanding
for the periods, including dilutive effects of stock options,
warrants granted and convertible preferred stock. Dilutive options
and warrants that are issued during a period or that expire or are
canceled during a period are reflected in the computations for the
time they were outstanding during the periods being reported. Since
Indoor Harvest has incurred losses for all periods, the impact of
the common stock equivalents would be anti- dilutive and therefore
are not included in the calculation.
For
the three months ended March 31, 2020 and 2019, respectively, the
following common stock equivalents were excluded from the
computation of diluted net loss per share as the result of the
computation was anti-dilutive.
|
|
Three months ended |
|
|
|
March
31, |
|
|
|
2020 |
|
|
2019 |
|
|
|
(Shares) |
|
|
(Shares) |
|
Series A Preferred
Stock |
|
|
2,884,615,385 |
|
|
|
27,402,265 |
|
Convertible
notes |
|
|
4,157,725,282 |
|
|
|
44,125,424 |
|
Total |
|
|
7,042,340,667 |
|
|
|
71,527,689 |
|
Derivative
Liability
The
Company accounts for derivative instruments in accordance with ASC
815, which establishes accounting and reporting standards for
derivative instruments and hedging activities, including certain
derivative instruments embedded in other financial instruments or
contracts and requires recognition of all derivatives on the
balance sheet at fair value, regardless of hedging relationship
designation. Accounting for changes in fair value of the derivative
instruments depends on whether the derivatives qualify as hedge
relationships and the types of relationships designated are based
on the exposures hedged. At March 31, 2020 and December 31, 2019,
the Company did not have any derivative instruments that were
designated as hedges.
Revenue
Recognition
Revenues
are recognized when control of the promised goods or services are
transferred to a customer, in an amount that reflects the
consideration that the Company expects to receive in exchange for
those goods or services. The Company applies the following five
steps in order to determine the appropriate amount of revenue to be
recognized as it fulfills its obligations under each of its
agreements:
|
● |
identify
the contract with a customer; |
|
● |
identify
the performance obligations in the contract; |
|
● |
determine
the transaction price; |
|
● |
allocate
the transaction price to performance obligations in the contract;
and |
|
● |
recognize
revenue as the performance obligation is satisfied. |
Revenue
from construction contracts are reported under the percentage of
completion method for financial statement purposes. The estimated
revenue for each contract reflected in the financial statements
represent that percentage of estimated total revenue that costs
incurred to date bear to estimated total costs, based on the
Company’s current estimates. With respect to contracts that extend
over one or more accounting periods, revisions in costs and revenue
estimates during the work are reflected in the period the revisions
become known. When current estimates of total contract costs
indicate a loss, provision is made for the entire estimated
loss.
The
asset, “costs and estimated earnings in excess of billings on
uncompleted contracts,” represents revenues recognized in excess of
amounts billed. The liability, “Estimated earnings on uncompleted
contracts,” represents billings in excess of revenues
recognized.
Billing
practices for these projects are governed by the contract terms of
each project based upon actual costs incurred, achievement of
milestones, or pre-agreed schedules. Billings do not necessarily
correlate with revenue recognized under the percentage of
completion method of accounting. Except for claims and change
orders that are in the process of being negotiated with customers,
unbilled work is usually billed during normal billing processes
following achievement of the contractual requirements.
Fair
Value of Financial Instruments
As
defined in ASC 820” Fair Value Measurements,” fair value is
the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date (exit price). The Company
utilizes market data or assumptions that market participants would
use in pricing the asset or liability, including assumptions about
risk and the risks inherent in the inputs to the valuation
technique. These inputs can be readily observable, market
corroborated, or generally unobservable. The Company classifies
fair value balances based on the observability of those inputs. ASC
820 establishes a fair value hierarchy that prioritizes the inputs
used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets or liabilities (level 1 measurement) and the
lowest priority to unobservable inputs (level 3
measurement).
The
following table summarizes fair value measurements by level at
March 31, 2020 and December 31, 2019, measured at fair value on a
recurring basis:
March 31, 2020 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
4,551,708 |
|
|
$ |
4,551,708 |
|
December 31, 2019 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
None |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,029,748 |
|
|
$ |
3,029,748 |
|
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20
“Debt—Debt with “Conversion and Other Options” and ASC subtopic
815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard
reduced the number of accounting models for convertible debt
instruments and convertible preferred stock. Convertible
instruments that continue to be subject to separation models are
(1) those with embedded conversion features that are not clearly
and closely related to the host contract, that meet the definition
of a derivative, and that do not qualify for a scope exception from
derivative accounting; and, (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as
paid-in capital. The amendments in this update are effective for
fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted, but
no earlier than fiscal years beginning after December 15, 2020,
including interim periods within those fiscal years. The Company is
currently assessing the impact of the adoption of this standard on
its consolidated financial statements.
NOTE 2 - GOING CONCERN
The accompanying unaudited consolidated financial statements have
been prepared assuming that the Company will continue as a going
concern, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. The
Company had minimal cash as of March 31, 2020, incurred losses from
its operations and did not generate cash from its operation for
past two years and the three months ended March 31, 2020. These
factors, among others, raise substantial doubt about the Company’s
ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of
this uncertainty.
The Company’s continued existence is dependent upon management’s
ability to develop profitable operations, continued contributions
from the Company’s executive officers to finance its operations and
the ability to obtain additional funding sources to explore
potential strategic relationships and to provide capital and other
resources for the further development and marketing of the
Company’s products and business
NOTE 3 – ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
|
|
March
31, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
Accounts payable |
|
$ |
181,583 |
|
|
$ |
130,584 |
|
Credit card |
|
|
14,720 |
|
|
|
16,595 |
|
Accrued expenses |
|
|
15,714 |
|
|
|
15,714 |
|
Accrued former management fee |
|
|
4,000 |
|
|
|
9,000 |
|
Accrued
interest |
|
|
250,960 |
|
|
|
227,817 |
|
|
|
$ |
466,977 |
|
|
$ |
399,710 |
|
NOTE 4 - CONVERTIBLE NOTES PAYABLE
Convertible
notes payable on March 31, 2020 and December 31, 2019 are as
follows:
|
|
March 31, |
|
|
December 31, |
|
|
|
2020 |
|
|
2019 |
|
Note 2 |
|
|
50,000 |
|
|
|
50,000 |
|
Note 3 |
|
|
213,279 |
|
|
|
226,956 |
|
Note 4 |
|
|
522,885 |
|
|
|
522,884 |
|
Note 5 |
|
|
57,500 |
|
|
|
65,000 |
|
Note 6 |
|
|
48,000 |
|
|
|
48,000 |
|
Note 7 |
|
|
38,000 |
|
|
|
38,000 |
|
Total convertible notes payable |
|
|
929,664 |
|
|
|
950,840 |
|
|
|
|
|
|
|
|
|
|
Less:
Unamortized debt discount |
|
|
(35,315 |
) |
|
|
(53,012 |
) |
Total convertible notes |
|
|
894,349 |
|
|
|
897,828 |
|
|
|
|
|
|
|
|
|
|
Less: current
portion of convertible notes |
|
|
894,349 |
|
|
|
897,828 |
|
Long-term
convertible notes |
|
$ |
- |
|
|
$ |
- |
|
During
the three months ended March 31, 2020 and 2019, the Company
recorded interest expense (income) of $($41,165) and $9249, and
amortization of discount of $17,697 and $14,418, respectively. As
of March 31, 2020 and December 31, 2019, the Company had accrued
interest of $250,960 and $227,817, respectively.
Conversion
During
the three months ended March 31, 2020, the Company converted notes
with principal amounts and accrued interest of $21,177 into
70,264,956 shares of common stock. The corresponding derivative
liability at the date of conversion of $38,999 was settled through
additional paid in capital.
Note
2
On
October 12, 2017, the Company issued a fixed convertible promissory
note to Tangiers for the principal sum of $50,000 as a commitment
fee for the Investment Agreement. The promissory note (“Note 2”)
maturity date is May 12, 2018. The principal amount due under Note
2 can be converted by Tangiers any time, into shares of the
Company’s common stock at a conversion price of $0.1666 per share.
The promissory note is in a “Maturity Default,” which is defined in
Note 2 as the event in which Note 2 is not retired prior to its
maturity date, Tangiers’ conversion rights under Note 2 would be
adjusted such that the conversion price would be the lower of (i)
$0.1666 or (ii) b) 65% of the average of the two lowest trading
prices of the Company’s common stock during the 10 consecutive
trading days prior to the date on which Tangiers elects to convert
all or part of the note. The default interest rate is
20%.
Note
3
On
January 16, 2018, the Company issued and sold an 8% Fixed
Convertible Promissory Note (“Note 3”) to Tangiers (the “Buyer”),
in the aggregate principal amount of up to $550,000, which includes
a 10% original issue discount. Note 3 is convertible into shares of
the Company’s common stock at a conversion price of $0.30 per
share. However, if Note 3 is not paid back on or before the
maturity date, defined in Note 3 as a “Maturity Default”, the
conversion price of Note 3 shall then be adjusted to be equal to
the lower of: (i) $0.30 or (ii) 65% multiplied by the lowest
trading price of the Company’s common stock in the fifteen (15)
consecutive trading day period immediately preceding the trading
day that the Company receives a notice of conversion of Note
3.
On
February 13, 2018, April 17, 2018, June 13, 2018, and July 27,
2018, the Company executed Amendments #1, #2, #3, and #4 to the
Tangiers Note 3 for draws of $132,000, $132,000, $101,750 and
$101,750, respectively. All other terms and conditions of the
Tangiers Note 3 remain effective.
Note
4
On
September 14, 2018, the Company issued and sold an 8% Fixed
Convertible Promissory Note (“Note 4”) to Tangiers (the “Buyer”),
in the aggregate principal amount of up to $550,000, which includes
a 10% original issue discount. Note 4 is convertible into shares of
the Company’s common stock at a conversion price of $0.08 per
share. However, if Note 4 is not paid back on or before the
maturity date, defined in Note 4 as a “Maturity Default”, the
conversion price of Note 4 shall then be adjusted to be equal to
the lower of: (i) $0.08 or (ii) 65% of the lowest trading price of
the Company’s common stock during the 15 consecutive trading days
prior to the date on which Buyer elects to convert all or part of
the Note 4.
On December 14, 2018, April 2, 2019, and June 7, 2019, the Company
executed Amendments #1, #2 and #3 to the Tangiers Note 4 for draws
of $171,050, $110,000 and $71,834, respectively. All other terms
and conditions of the Tangiers Note 4 remain effective.
Note
5
On
September 23, 2019, the Company issued and sold an 10% Fixed
Convertible Promissory Note (“Note 5”) to Power Up Lending Group
Ltd. (“Power Up”), in the principal amount of $65,000, which
includes a $3,000 original issue discount. Note 5 is convertible
into shares of the Company’s common stock one hundred eighty (180)
days from September 23, 2019. Note 5 is convertible at a conversion
price of 61% of the average of the two (2) lowest trading prices of
the Company’s common stock during the twenty (20) consecutive
trading days prior to the date of on which Power Up elects to
convert all or part of the Note 5.
Note
6
On
October 22, 2019, the Company issued and sold an 10% Fixed
Convertible Promissory Note (“Note 6”) to Power Up Lending Group
Ltd. (“Power Up”), in the principal amount of $48,000, which
includes a $3,000 original issue discount. Note 6 is convertible
into shares of the Company’s common stock one hundred eighty (180)
days from October 22, 2019. Note 6 is convertible at a conversion
price of 61% of the average of the two (2) lowest trading prices of
the Company’s common stock during the twenty (20) consecutive
trading days prior to the date of on which Power Up elects to
convert all or part of the Note 6.
Note
7
On
December 19, 2019, the Company issued and sold an 10% Fixed
Convertible Promissory Note (“Note 7”) to Power Up Lending Group
Ltd. (“Power Up”), in the principal amount of $38,000, which
includes a $3,000 original issue discount. Note 7 is convertible
into shares of the Company’s common stock one hundred eighty (180)
days from December 22, 2019. Note 7 is convertible at a conversion
price of 61% of the average of the two (2) lowest trading prices of
the Company’s common stock during the twenty (20) consecutive
trading days prior to the date of on which Power Up elects to
convert all or part of the Note 7.
NOTE 5 - DERIVATIVE LIABILITIES
The
Company identified the conversion features embedded within its
convertible debts as financial derivatives. The Company has
determined that the embedded conversion option should be accounted
for at fair value.
At
March 31, 2020, the estimated fair values of the liabilities
measured on a recurring basis are as follows:
|
|
|
Three
months ended |
|
|
|
|
March
31, 2020 |
|
Expected term |
|
|
0.06
- 0.50 |
|
Expected average volatility |
|
|
304%
- 317 |
% |
Expected dividend yield |
|
|
- |
|
Risk-free interest rate |
|
|
0.07%
- 0.15 |
% |
The
following schedule shows the change in fair value of the derivative
liabilities at March 31, 2020:
Fair Value
Measurements Using Significant Observable Inputs (Level 3) |
Balance - December 31, 2019 |
|
$ |
3,029,748 |
|
Addition of new derivatives recognized
as loss on derivatives |
|
|
- |
|
Settled on issuance of common
stock |
|
|
(38,999 |
) |
Loss on change
in fair value of the derivative |
|
|
1,560,959 |
|
Balance - March 31, 2020 |
|
|
4,551,708 |
|
The
aggregate loss on derivatives during the three months ended March
31, 2020 and 2019 was $1,560,959 and $223,655,
respectively.
NOTE 6 - RELATED PARTY TRANSACTIONS
Convertible
Promissory Note
On
September 28, 2020, the Company entered into a Convertible
Promissory Note with Electrum Partners, LLC, (the “Electrum
Partners”) for $10,000 with a maturity of 90 days. The proceeds
were used for general corporate purposes. Electrum Partners, LLC is
an entity under common control with the Company, in that the Chief
Executive Officer of the Company is also the managing member of
said other entity.
NOTE 7 - SHAREHOLDERS’ EQUITY
On May 11, 2020, the Company completed an increase in the
authorized shares of the Company’s stock to a total number of
10,015,000,000, allocated as follows among these classes and series
of stock:
|
● |
Common Stock Class, par value
$0.001 per share - 10,000,000,000 shares authorized. |
|
● |
Preferred Stock Class, Series A,
par value $0.01 per share - 15,000,000 shares
authorized. |
Convertible Series A Preferred Stock
As of
March 31, 2020 and December 31, 2019, there were 750,000 and
750,000 shares of Series A Convertible Preferred Stock issued and
outstanding.
Common Stock
During
the three months ended March 31, 2020, the Company issued
72,285,962 shares of common stock as follows;
|
● |
2,021,006
shares to consultant valued at $72,920 for consulting
services |
|
● |
70,264,956
shares for conversion of debt of $21,177 |
Common Stock Warrants and option
As of
March 31, 2020, no warrants or options were outstanding.
NOTE 8 - SUBSEQUENT EVENTS
Effective
May 11, 2020, the Company (Registrant) mutually and amicably
completed a change of officers, as to the principal accounting
officer and principal executive officer, the person serving in the
capacity of interim CEO and interim CFO. Mr. Cook, serving as both
up to such time, departed, and no longer serves in any officer or
Director capacity. The Board of Directors appointed Leslie Bocskor
to act as a principal executive officer serving in the capacity of
CEO with non-material arrangements to apply moving forward,
including compensation of $2,500 monthly, potential stock, and
other considerations, indemnifications, and reimbursement of
expenses.
On
September 28, 2020, the Company entered into a Convertible
Promissory Note with Electrum Partners, LLC, (the “Electrum
Partners”) for $10,000 USD with a maturity of 90 days. The proceeds
will be used for general corporate purposes. Electrum Partners, LLC
is an entity under common control with the Company, in that the
Chief Executive Officer of the Company is also the managing member
of said other entity.
About
March 2021, a third party advanced $25,000 to assist the Company in
operating expenses and the Company is in the process of confirming
arrangements for the repayment of said amount; it is anticipated it
will be a promissory note due from the Company in cash or
stock.
The Registrant had a dispute with Power Up Lending Group, Ltd.,
the holder of certain promissory notes dated October 22,
2019, and December 19, 2019, issued by the Registrant,
including allegations or claims of default and suit, and related.
As part of the company recovery efforts after COVID-19, with
amicable cooperation from “Power Up”, in third quarter of 2021 the
Registrant reached a full payoff resolution for $80,000 to
successfully settle all issues.
On
August 4, 2021, the Company formalized its employment and
compensation arrangement with Mr. Leslie Bocskor. Mr. Bocskor
was initially engaged as CEO on May 11, 2020 at a monthly rate of
$2,500 pending the establishment of a comprehensive employment and
compensation agreement. To date, Mr. Bocskor has not received
any consideration for his efforts, and over this time continued to
bring necessary resources to the company in the form of executive
and administrative support, and more as needed. These
resources included several critical functions provided
by individuals and entities who worked to support the CEO
and the Company over the prior year to stabilize and sustain
the Company and lay the foundation for future success.
The
Board has recognized the substantive efforts of
Messrs.Leslie Bocskor, Benjamin Rote,
and Dennis Forchic to sustain and support
the Company over the past year without compensation while
laying the foundation for the future. The Board has voted to
formalize employment agreements with Messrs. Bocskor and Rote, and
an advisory agreement with Mr. Forchic. Stock option
agreements reflecting past contributions and incentives for the
future have been issued to all three parties. Stock options plans
were offered with an exercise price of $0.01 and consideration of
150 million options to Mr. Bocskor, 100 million options to Mr.
Rote, and 150 million options to Mr. Forchic vesting immediately.
On the 1 year anniversary of their respective agreements,
additional stock options priced at $0.015 will vest with
consideration of 150 million options to Mr. Bocskor, 100 million
options to Mr. Rote, and 150 million options to Mr.
Forchic.
Additionally,
the Board, consisting of Directors Rick Gutshall and Lang Coleman,
having not received any consideration over the past 2 years, will
receive stock options of 5 million options each at a price of
$0.01. The company’s legal counsel will be receiving 10 million
options, under the same terms as the Board, in recognition of their
valuable work and support.
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation |
Results of Operations
Three
months ended March 31, 2020 compared to three months ended March
31, 2019
The
following table presents our operating results for the three months
ended March 31, 2020 compared to December 31, 2019:
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
March
31, |
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
Change |
|
|
% |
|
Revenue |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
- |
|
Operating
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense |
|
|
- |
|
|
|
2,942 |
|
|
|
(2,942 |
) |
|
|
(100 |
)% |
Professional fees |
|
|
127,150 |
|
|
|
141,099 |
|
|
|
(13,949 |
) |
|
|
(10 |
)% |
General and
administrative expenses |
|
|
4,679 |
|
|
|
142,022 |
|
|
|
(137,343 |
) |
|
|
(97 |
)% |
Total operating
expenses |
|
|
131,829 |
|
|
|
286,063 |
|
|
|
(154,234 |
) |
|
|
(5
4 |
)% |
Loss from
operations |
|
|
(131,829 |
) |
|
|
(286,063 |
) |
|
|
154,234 |
|
|
|
(5
4 |
)% |
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Interest income (expense) |
|
|
(41,165 |
) |
|
|
9,294 |
|
|
|
(50,459 |
) |
|
|
(543 |
)% |
Amortization of debt discount |
|
|
- |
|
|
|
(14,418 |
) |
|
|
14,418 |
|
|
|
(100 |
)% |
Change in fair
value of embedded derivative liability |
|
|
(1,560,959 |
) |
|
|
(223,655 |
) |
|
|
(1,337,304 |
) |
|
|
598 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income (expense) |
|
|
(1,602,124 |
) |
|
|
(228,779 |
) |
|
|
(1,373,345 |
) |
|
|
600 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,733,953 |
) |
|
$ |
(514,842 |
) |
|
$ |
(1,219,111 |
) |
|
|
237 |
% |
Revenues
During
the three months ended March 31, 2020 and 2019, the Company
generated no revenue.
Operating Expenses
Total
operating expenses for the three months ended March 31, 2020 and
2019 were $131,829 and $286,063, respectively, for an aggregate
decrease of $154,234 or 54%. The aggregate decrease is related to a
decrease in professional fees of $13,949 or 10% and primarily
driven by a decrease in general and administrative expenses of
$137,343 or 97% associated with lower corporate activity negatively
influenced by Covid-19.
Other Income (Expense)
Total
other income (expense) for the three months ended March 31, 2020
and 2019 were ($1,602,124) and ($228,779), respectively. The
increase in other expense is primarily related to the change in the
fair value of the embedded derivative liability from ($223,655) to
($1,560,959).
Net Loss
As a
result of the factors discussed above, net loss for the three
months ended March 31, 2020 and 2019 was $1,733,953 and $514,842,
respectively, for an increase of $1,219,111 or 237%.
Liquidity
and Capital Resources
The
following table provides selected financial data about our Company
as of March 31, 2020 and December 31, 2019,
respectively.
Working
Capital
|
|
March
31,
2020 |
|
|
December
31,
2019 |
|
|
Change |
|
|
% |
|
Current assets |
|
$ |
2,852 |
|
|
$ |
17,684 |
|
|
$ |
(14,832 |
) |
|
|
(84 |
)% |
Current
liabilities |
|
$ |
5,915,165 |
|
|
$ |
4,331,080 |
|
|
$ |
1,584,085 |
|
|
|
37 |
% |
Working capital
deficiency |
|
$ |
(5,912,313 |
) |
|
$ |
(4,313,396 |
) |
|
$ |
(1,598,917 |
) |
|
|
37 |
% |
Cash
Flows
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
|
March 31,
2020 |
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
Change |
|
|
% |
|
Cash used in operating
activities |
|
$ |
(7,838 |
) |
|
$ |
(146,825 |
) |
|
$ |
138,987 |
|
|
|
(95 |
)% |
Cash provided by financing
activities |
|
$ |
(1,663 |
) |
|
$ |
(2003 |
) |
|
$ |
340 |
|
|
|
(17 |
)% |
Net Change in Cash During Period |
|
$ |
(9,501 |
) |
|
$ |
(148,828 |
) |
|
$ |
139,327 |
|
|
|
(94 |
)% |
As of
March 31, 2020, our Company’s cash balance was $2,852 and total
assets were $8,217. As of December 31, 2019, our Company’s cash
balance was $12,353 and total assets were $24,989.
As of
March 31, 2020, our Company had total liabilities of $5,915,165
compared with total liabilities of $4,331,080 as at December 31,
2019.
As of
March 31, 2020, our Company had a working capital deficiency of
$5,912,313 compared with a working capital deficiency of $4,313,396
as at December 31, 2019. The increase in working capital deficiency
was primarily attributed to an increase in accounts payable and
derivative liabilities offset by a decrease in cash.
Cash
Flow from Operating Activities
Net
cash used in operating activities for the three months ended March
31, 2020 and 2019 were $7,838 and $146,825 respectively, for a
decrease of $138,987. The improvement in net cash used in operating
activities is primarily related to an increase in operating
liabilities.
Cash
Flow from Investing Activities
For
the three months ended March 31, 2020 and 2019, our Company did not
have any investing activities.
Cash
Flow from Financing Activities
Net
cash provided by (used in) financing activities for the three
months ended March 31, 2020 and 2019 were ($1,663) and ($2,003),
respectively. During the three months ended March 31, 2020, our
Company repaid note payable of $1,663.
Item 3. |
Quantitative
and Qualitative Disclosures About Market Risk |
As a
“smaller reporting company”, we are not required to provide the
information required by this Item.
Item 4. |
Controls
and Procedures |
Evaluation of Disclosure Controls and Procedures
The
Company maintains disclosure controls and procedures (as defined in
Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)) that are designed to ensure that
information required to be disclosed in the Company’s Exchange Act
reports is recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms, and that such
information is accumulated and communicated to the Company’s
management, including its Chief Executive Officer, Chief Financial
Officer, as appropriate, to allow timely decisions regarding
required disclosure.
In
designing and evaluating the disclosure controls and procedures,
management recognizes that any controls and procedures, no matter
how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and
management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and
procedures.
The
Company’s management, consisting solely of the Company’s Chief
Executive Officer, Chief Financial Officer, has evaluated the
effectiveness of the Company’s disclosure controls and procedures
as of the end of the period covered by this report. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer
has concluded that, as of March 31, 2020, the Company’s disclosure
controls and procedures were not effective because of the following
internal control over financial reporting deficiencies:
● We
currently have an insufficient complement of personnel with the
necessary accounting expertise and an inadequate supervisory review
structure with respect to the requirements and application of US
GAAP and SEC disclosure requirements.
● We
currently have insufficient written policies and procedures for
accounting and financial reporting with respect to the requirements
and application of US GAAP and SEC disclosure
requirements.
● We
currently lack a formal process and timeline for closing the books
and records at the end of each reporting period and such weaknesses
restrict the Company’s ability to timely gather, analyze and report
information relative to the financial statements.
● Our
Company’s management is composed of a small number of individuals
resulting in a situation where limitations on segregation of duties
exist.
We
will continue to monitor and evaluate the effectiveness of our
disclosure controls and procedures and our internal controls over
financial reporting on an ongoing basis and are committed to taking
further action and implementing additional enhancements or
improvements, as necessary and as funds allow.
Changes in Internal Controls
There
have been no changes in our internal controls over financial
reporting identified in connection with the evaluation required by
paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15
that occurred in the quarter ended March 31, 2020 that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART II - OTHER
INFORMATION
Item 1. |
Legal
Proceedings |
From
time to time we may become involved in various legal proceedings
that arise in the ordinary course of business. We are not currently
a party to any material legal proceeding.
As a
“smaller reporting company”, we are not required to provide the
information required by this Item.
Item 2. |
Unregistered
Sales of Equity Securities and Use of Proceeds |
None.
Item 3. |
Defaults
Upon Senior Securities |
None.
Item 4. |
Mine
Safety Disclosures |
Not
Applicable.
Item 5. |
Other
Information |
(a)
Not applicable.
(b)
Not applicable.
The
following exhibits are included as part of this report:
*
Filed herewith. In addition, in accordance with SEC Release
33-8238, Exhibits 32.1 and 32.2 are being furnished and not
filed.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
INDOOR
HARVEST CORP. |
|
(Registrant) |
|
|
Dated:
August 6, 2021 |
/s/
Leslie Bocskor |
|
Leslie
Bocskor |
|
Chief
Executive Officer, Chief Financial Officer |
|
(Principal
Executive Officer)(Principal Financial Officer) |
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