UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Form
10-K
(Mark
One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For
the fiscal year ended December 31, 2020
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND 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)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
7401 W. Slaughter Lane #5078
Austin, Texas
|
|
78739 |
|
(Address
of principal executive offices) |
|
(Zip
code) |
Registrant’s
telephone number, including area code:
512-309-1776
Securities
registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act: Common Stock,
par value $0.001 per share
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate
by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No
☒
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for
the past 90 days. 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 (§ 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 ☐ No ☒
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, a 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 |
☒ |
Smaller
reporting company |
☒ |
| |
|
|
|
|
|
Emerging
growth company |
☒ |
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 has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act.) Yes ☐ No ☒
The
aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant on December 31, 2020 was
$8,404,886, based upon the closing price of $ 0.0035 of the
registrant’s common stock on that date as reported on OTC Markets
Group Inc.
As of
August 27, 2021, there were 2,401,396,041 shares of registrant’s
common stock outstanding.
TABLE
OF CONTENTS
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS AND
INFORMATION
This
Annual Report on Form 10-K, the other reports, statements, and
information that we have previously filed or that we may
subsequently file with the Securities and Exchange Commission, or
SEC, and public announcements that we have previously made or may
subsequently make include, may include, incorporate by reference or
may incorporate by reference certain statements that may be deemed
to be “forward- looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995 and are intended
to enjoy the benefits of that act. Unless the context is otherwise,
the forward-looking statements included or incorporated by
reference in this Form 10-K and those reports, statements,
information and announcements address activities, events or
developments that Indoor Harvest, Corp. (hereinafter referred to as
“we,” “us,” “our,” “our Company” or “Indoor Harvest”) expects or
anticipates, will or may occur in the future. Any statements in
this document about expectations, beliefs, plans, objectives,
assumptions or future events or performance are not historical
facts and are forward-looking statements. These statements are
often, but not always, made through the use of words or phrases
such as “may,” “should,” “could,” “predict,” “potential,”
“believe,” “will likely result,” “expect,” “will continue,”
“anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,”
“would” and “outlook,” and similar expressions. Accordingly, these
statements involve estimates, assumptions and uncertainties, which
could cause actual results to differ materially from those
expressed in them. Any forward-looking statements are qualified in
their entirety by reference to the factors discussed throughout
this document. All forward-looking statements concerning economic
conditions, rates of growth, rates of income or values as may be
included in this document are based on information available to us
on the dates noted, and we assume no obligation to update any such
forward-looking statements. It is important to note that our actual
results may differ materially from those in such forward-looking
statements due to fluctuations in interest rates, inflation,
government regulations, economic conditions and competitive product
and pricing pressures in the geographic and business areas in which
we conduct operations, including our plans, objectives,
expectations and intentions and other factors discussed elsewhere
in this Report.
Certain
risk factors could materially and adversely affect our business,
financial conditions and results of operations and cause actual
results or outcomes to differ materially from those expressed in
any forward-looking statements made by us, and you should not place
undue reliance on any such forward-looking statements. Any
forward-looking statement speaks only as of the date on which it is
made and we do not undertake any obligation to update any
forward-looking statement or statements to reflect events or
circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. The risks and
uncertainties we currently face are not the only ones we face. New
factors emerge from time to time, and it is not possible for us to
predict which will arise. There may be additional risks not
presently known to us or that we currently believe are immaterial
to our business. In addition, we cannot assess the impact of each
factor on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.
If any such risks occur, our business, operating results,
liquidity and financial condition could be materially affected in
an adverse manner. Under such circumstances, you may lose all or
part of your investment.
The
industry and market data contained in this report are based either
on our management’s own estimates or, where indicated, independent
industry publications, reports by governmental agencies or market
research firms or other published independent sources and, in each
case, are believed by our management to be reasonable estimates.
However, industry and market data is subject to change and cannot
always be verified with complete certainty due to limits on the
availability and reliability of raw data, the voluntary nature of
the data gathering process and other limitations and uncertainties
inherent in any statistical survey of market shares. We have not
independently verified market and industry data from third-party
sources. In addition, consumption patterns and customer preferences
can and do change. As a result, you should be aware that market
share, ranking and other similar data set forth herein, and
estimates and beliefs based on such data, may not be verifiable or
reliable.
PART I
Item 1. Business.
Organization
Indoor
Harvest Corp (the “Company”) is a Texas corporation formed on
November 23, 2011. Our principal executive office was located at
7401 W. Slaughter Lane #5078, Austin, Texas 78739 for the year
ended 2019. From inception until about August 4, 2017, in summary,
the Company pursued a business of certain engineering, procurement
and construction related services as to the indoor and vertical
farming industry and production platforms, mechanical systems and
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 pursuits 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 actively
selling 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 3, 2017, we formed Alamo Acquisition, LLC, a wholly owned
Texas limited liability company (“Alamo Acquisition Sub”). On
August 4, 2017, the Company ceased actively supporting business
development of vertical farms for produce production and
consummated a business acquisition (the “Alamo Acquisition”)
pursuant to which Alamo Acquisition Sub acquired all of the
outstanding membership interests of Alamo CBD, LLC (“Alamo CBD”), a
Texas limited liability company. Upon closing of the Alamo
Acquisition, the membership interests of Alamo CBD were exchanged
for 7,584,008 shares of Indoor Harvest’s common stock, the parent
company of Alamo Acquisition Sub. Alamo CBD continued as our
surviving wholly-owned subsidiary, and Alamo Acquisition Sub ceased
to exist.
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 will provide consulting
and other services to the Company and others on a contracted
basis.
Description of Business
Indoor
Harvest, through its brand name Indoor Harvest®, is focused on
leveraging technology and planning on Vertical Farming, Building
Integrated Agriculture, Controlled Environment Agriculture and
Aeroponic Cultivation technology with other synergistic enterprises
in the Cannabis industry as part of our new 2019 merger and
acquisition or an M&A/vertical integration strategy.
We
developed technology relating to a high pressure aeroponic platform
for growing cannabis. Aeroponic production differs from both
conventional hydroponics and in-vitro (plant tissue culture)
growing. Unlike hydroponics, which uses water as a growing medium,
along with essential minerals to sustain plant growth, aeroponics
uses no growing medium. We plan to continue to look for partners
and opportunities to refine the development and commercialization
of our high pressure Aeroponic Cultivation technology.
Our
previous efforts focused on aggregating and integrating early stage
cannabis companies focused on Genetics, Tissue Culture, Controlled
Environment Ag technologies, including high pressure Aeroponic
Cultivation, Micropropagation and Cultivation
operations.
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.
Our
operational expenditures will be focused on our 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 September30, 2020. 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.
Industry and Regulatory Overview
The
United States federal government regulates drugs through the CSA
(21 U.S.C. § 811), which places controlled substances, including
cannabis, in a schedule. Cannabis is classified as a Schedule I
drug, which is viewed as highly addictive and having no medical
value. The United States Federal Drug Administration (“FDA”) has
not approved the sale of cannabis for any medical application.
Doctors may not prescribe cannabis for medical use under federal
law, however, they can recommend its use under the First Amendment.
In 2010, the United States Veterans Affairs Department clarified
that veterans using medicinal cannabis will not be denied services
or other medications that are denied to those using illegal
drugs.
State
legalization efforts conflict with the CSA, which makes cannabis
use and possession illegal on a national level. On August 29, 2013,
the U.S. Department of Justice (“DOJ”) issued a memorandum (the
“Cole Memo”) providing that where states and local governments
enact laws authorizing cannabis-related use, and implement strong
and effective regulatory and enforcement systems, the federal
government will rely upon states and local enforcement agencies to
address cannabis activity through the enforcement of their own
state and local narcotics laws.
On
January 4, 2018, the DOJ suspended the Cole Memo and replaced it
with a new Memorandum titled with the subject “Marijuana
Enforcement” from Attorney General Jeff Sessions which provides
that each U.S. Attorney has the discretion to determine which types
of cannabis-related cases should be federally prosecuted, thus
ending the broad safe harbor provided under the Cole
Memo.
In
November 2018, Attorney General Sessions resigned and left the DOJ.
As a nominee, Attorney General William Barr testified before the
U.S. Senate and wrote to Congress that, as Attorney General, he
would not seek to prosecute cannabis companies that relied on the
Cole Memo and are complying with state law.
As of
April 25, 2019, 34 states, the District of Columbia and Guam allow
their citizens to use medical cannabis through de-criminalization.
Within this list of jurisdictions, voters in the States of Alaska,
California, Colorado, D.C., Maine, Massachusetts, Nevada, Oregon,
Vermont, and Washington have legalized cannabis for adult
recreational use.
The
Company continues to follow and monitor the actions and statements
of the Trump administration, the DOJ and Congress’ positions on
federal law and cannabis policy. As the possession and use of
cannabis is illegal under the CSA, we could be deemed to be aiding
and abetting illegal activities through the equipment we intend to
sell in the U.S. and directly violating federal law if we should
begin producing cannabis under State law. Under federal law, and
more specifically the CSA, the possession, use, cultivation, and
transfer of cannabis is illegal. Our equipment could be used by
persons or entities engaged in the business of possession, use,
cultivation, and/or transfer of cannabis.
As a
result, law enforcement authorities, in their attempt to regulate
the illegal use of cannabis, could seek to bring an action or
actions against us, including, but not limited to, a claim of
aiding and abetting another’s criminal activities or directly
violating the CSA. The federal aiding and abetting statute provides
that anyone who “commits an offense against the United States or
aids, abets, counsels, commands, induces or procures its
commission, is punishable as a principal” (18 U.S.C. §2(a).)
Enforcement of federal law regarding cannabis would likely result
in the Company being unable to proceed with our business plans,
could expose us to potential criminal liability and could subject
our properties to civil forfeiture which could lead to an entire
loss of any investment in the Company. Any changes in banking,
insurance or other business services may also affect our ability to
operate our business.
Nothing
herein is a legal opinion or a complete or up to date statement on
laws, regulations, or policies, especially given the shifting legal
and regulatory landscape.
Changes in Business Operations
2020
was a continuation of our 2019 restructuring, reorganizing, and
repositioning of the business. The Company believes it is
positioned to start executing its business strategy and leveraging
the public company to create shareholder value. The recent
long-term commitments of the new management team coupled with a
robust business network to support our business initiatives have
laid the foundation for the future. We will be working on branding
and building our team in 2021, once we have our new plans
funded.
The
Company’s current strategy is to position itself as an integrated
consolidation platform offering for cannabis industry companies
focused on hemp, other hemp-related products, CBD, CPG, and
ancillary business verticals 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 is subject to risks, no assurance exists of ability to
raise sufficient capital on good terms or our ability to become
profitable.
Intellectual Property
The
Company relies on a strategy of a combination of patent law,
trademark laws, trade secrets, confidentiality provisions and other
contractual provisions to protect our proprietary rights, which are
primarily our brand names, product designs and marks. This does not
mean these efforts are up to date or fully effective. The following
summarizes certain filings. The Company is currently studying the
legal aspects of these, including recent and past communications
from counsel and the patent office, and makes no promise or
representation as to this information which is subject to
correction and update.
The
Company’s primary trademark is “Indoor Harvest.” This trademark was
registered (Registration Number 4,795,471) in the United States on
August 18, 2015.
The
Company filed a patent application (Serial Number 14/120,275) with
the United States patent office related to an invention titled:
“modular aeroponic system and related methods.” The inventor is
Chad Sykes, who assigned the patent application to the
Company.
We
will research the status of our filings and restructure or update
as needed this year.
Plan of Expanded Operations
Our
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.
Sales and Marketing
We
seek to differentiate ourselves in a crowded market. While we
continue to look for opportunities to leverage our aeroponic system
designs to further refine development and commercialization, we are
now also positioning the Company as an integrated consolidation
platform offering cannabis companies the opportunity to be part of
a bigger play, sharing intellectual capital, technology, access to
capital markets and liquidity for investors.
We
will be working on branding and building our team in 2020, once we
have our new plans funded.
Competition and Market Position
Our 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.
This may be done by asset acquisitions, mergers, joint ventures, or
other strategic initiatives.
OTC
Markets
OTC
Markets offer small companies almost comparable benefits of the
NYSE or Nasdaq markets, a liquid, secondary trading market,
visibility, access to capital, a public market valuation and the
ability for small companies to build their brand and reputation
across the network, at nearly half the cost of an NYSE
listing.
We
are positioning to compete with consolidated or vertically
integrated cannabis science and technology companies trading on the
OTC Markets.
Technology
Competition
We
will be a small competitor in the industry. Many of our competitors
have substantially greater financial, marketing, personnel, and
other resources than we do. We believe based upon management’s
knowledge of the industry that we are the first company to develop
and offer a fixture based, fully integrated aeroponic
biomanufacturing platform for the cannabis industry. Instead of
relying on a product-based design, we have developed individual
fixtures that can be used in whole, or in part, to create a variety
of modular designs of any scale, or size. By breaking our platform
down into individual, independent fixtures, we offer a level of
customizability that currently is not offered by our
competitors.
Manufacturing
The
Company does not foresee manufacturing its own product platform to
sell to the cannabis market.
Rather,
we will pursue opportunities to develop our technology with third
party partners and eventually license or sell that technology or
deploy it in the market as part of a joint venture cultivation
operation.
The
Company plans to source products and accessories from third party
manufacturing companies that manufacture products in part using
tooling we own, in accordance with our specifications.
Employees
As of
December 31, 2020, we have no full-time employees but use a variety
of advisors and consultants.
Governmental Regulation and Certification
Except
as set forth below, we are not aware of any material governmental
regulations or approvals for any of our products or
services.
As
the possession and use of cannabis is illegal under the CSA, we
could be deemed to be aiding and abetting illegal activities
through the equipment we intend to sell, lease and license in the
U.S. to grow cannabis. Additionally, we would be violating federal
law should we begin to manufacture and dispense cannabis under the
TCUP. Under federal law, and more specifically the CSA, the
possession, use, cultivation, and transfer of cannabis is illegal.
Our equipment could be used by persons or entities engaged in the
business of possession, use, cultivation, and/or transfer of
cannabis. As a result, law enforcement authorities, in their
attempt to regulate the illegal use of cannabis, could seek to
bring an action or actions against us, including, but not limited,
to a claim of aiding and abetting another’s criminal activities or
directly violating federal law by manufacturing or distributing
cannabis. The federal aiding and abetting statute provides that
anyone who “commits an offense against the United States or aids,
abets, counsels, commands, induces or procures its commission, is
punishable as a principal.” However, we do not believe that our
plans to license and sell technology as described herein violates
federal law and we believe that we would prevail if any such action
were brought against us although there can be no assurance of
this.
Cannabis
is a Schedule-I controlled substance and is illegal under federal
law. Even in such states that have legalized the use of cannabis,
its use remains a violation of federal law. Since federal law
criminalizing the use of cannabis preempts state laws that legalize
its use, strict enforcement of federal law regarding cannabis would
likely result in our inability to proceed with our business plan,
notably with respect to our plans for cannabis cultivation,
production and research. In addition, our assets, including real
property, cash, equipment and other goods, could be subject to
asset forfeiture because cannabis is still illegal at the federal
level should we begin to manufacture and distribute cannabis under
the TCUP.
In
February 2017, the Trump administration made announcements that
there could be “greater enforcement” of federal laws regarding
cannabis. To this end, on January 4, 2018, the DOJ suspended
certain Obama era protections set forth previously in the Cole
Memo, as such term is defined above, which was replaced with a new
Memorandum titled with the subject “Marijuana Enforcement” from
Attorney General Jeff Sessions which provides that each U.S.
Attorney has the discretion to determine which types of
cannabis-related cases should be federally prosecuted, thus ending
the broad safe harbor provided under the Cole Memo. Any such
enforcement actions could have a material adverse effect on our
business and results of operations. In November 2018, Attorney
General Sessions resigned and left the DOJ. As a nominee, Attorney
General William Barr testified before the U.S. Senate and wrote to
Congress that, as Attorney General, he would not seek to prosecute
cannabis companies that relied on the Cole Memo and are complying
with state law. The Company plans to continue to follow and monitor
the actions and statements of the Trump administration, the DOJ and
Congress’ positions on federal law and cannabis policy.
The
regulatory environment on a Federal, State, and Local level remains
opaque and ever changing. This aspect of business risk is in flux
and our disclosure should not be deemed a legal opinion or
interpreted as fully addressing the myriad regulatory challenges
inherent in the industry.
Emerging Growth Company Status
We
are an “emerging growth company” as defined in Section 2(a)(19) of
the Securities Act, as modified by the Jumpstart Our Business
Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to
take advantage of certain exemptions from various reporting
requirements that are applicable to other public companies that are
not “emerging growth companies” including, but not limited to, not
being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley Act”), reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy
statements, and exemptions from the requirements of holding a
non-binding advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously approved.
We intend to take advantage of all of these exemptions.
In
addition, Section 107 of the JOBS Act also provides that an
“emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities
Act for complying with new or revised accounting standards, and
delay compliance with new or revised accounting standards until
those standards are applicable to private companies. We have
elected to take advantage of the benefits of this extended
transition period.
We
could be an emerging growth company until the last day of the first
fiscal year following the fifth anniversary of our first common
equity offering, although circumstances could cause us to lose that
status earlier if our annual revenues exceed $1.0 billion, if we
issue more than $1.0 billion in non-convertible debt in any
three-year period or if we become a “large accelerated filer” as
defined in Rule 12b-2 under the Exchange Act.
Additional Information
We
are a public company and file annual, quarterly and special reports
and other information with the SEC. We are not required to, and do
not intend to, deliver an annual report to security holders. Our
filings are available, at no charge, to the public at
http://www.sec.gov.
ITEM 1A. Risk Factors.
We
are a smaller reporting company as defined by Rule 12b-2 of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and are not required to provide the information under this
item.
ITEM 1B. Unresolved Staff
Comments.
Smaller
reporting companies are not required to provide the information
required by this item.
Item 2. Properties.
Our
Offices
Our
headquarters are pending.
Item 3. Legal
Proceedings.
From
time to time, the Company may become involved in various lawsuits
and legal proceedings which arise in the ordinary course of
business. Litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to
time that may harm our business. The Company may be subject to one
or more claims or suits but based on COVID and management changes,
and problems with mail deliveries, we are not readily able to
supply all details as of this filing and plan to file updates as we
are able.
Item 4. Mine Safety
Disclosures.
Not
applicable.
PART II
Item 5. Market for Registrant’s Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Trading History
Our
common stock is quoted on the OTCMarkets under the symbol “INQD”.
As of December 31, 2020, there were 2,401,396,041 outstanding
shares of common stock and approximately 74 shareholders of record.
The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of common
stock whose shares are held in the names of bank, brokers and other
nominees.
Dividends
We
have not paid any cash dividends on our common stock to date. Any
future decisions regarding dividends will be made by our Board of
Directors. We do not anticipate paying dividends in the foreseeable
future but expect to retain earnings to finance the growth of our
business. Our Board of Directors has complete discretion on whether
to pay dividends. Even if our Board of Directors decides to pay
dividends, the form, frequency and amount will depend upon our
future operations and earnings, capital requirements and surplus,
general financial condition, contractual restrictions and other
factors that the Board of Directors may deem relevant.
There
are no restrictions in our articles of incorporation or bylaws that
prevent us from declaring dividends. The Texas Statutes, however,
prohibit us from declaring dividends where, after giving effect to
the distribution of the dividend:
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● |
We
would not be able to pay our debts as they become due in the usual
course of business; or |
| |
|
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| |
● |
Our
total assets would be less than the sum of our total liabilities
plus the amount that would be needed to satisfy the rights of
stockholders who have preferential rights superior to those
receiving the distribution, unless otherwise permitted under our
articles of incorporation. |
Securities Authorized for Issuance under Equity Compensation
Plans
We do
not have in effect any compensation plans under which our equity
securities are authorized for issuance.
Common
Stock
As of
December 31, 2020, there were 2,401,396,041 shares of common stock
issued and outstanding.
The
holders of our common stock have equal ratable rights to dividends
from funds legally available if and when declared by our Board of
Directors and are entitled to share ratably in all of our assets
available for distribution to holders of common stock upon
liquidation, dissolution or winding up of our affairs. Our common
stock does not provide the right to a preemptive, subscription or
conversion rights and there are no redemption or sinking fund
provisions or rights. Our common stockholders are entitled to one
non-cumulative vote per share on all matters on which stockholders
may vote.
All
shares of common stock now outstanding are fully paid for and
non-assessable. We refer you to our certificate of incorporation,
bylaws and the applicable statutes of the State of Texas for a more
complete description of the rights and liabilities of holders of
our securities.
Holders
of shares of our common stock do not have cumulative voting rights,
which means that the holders of more than 50% of the outstanding
shares, voting for the election of directors, can elect all of the
directors to be elected, if they so choose, and, in that event, the
holders of the remaining shares will not be able to elect any of
our directors.
Holders of Common Stock
We
have 74 shareholders of record for our common stock, as of December
31, 2020.
Preferred
Stock
The
Company has designated 15,000,000 shares of Series A Preferred
Stock with a par value of $0.01.
The
stated value of each issued share of Series A Convertible Preferred
Stock shall be deemed to be $1.00, as the same may be equitably
adjusted whenever there may occur a stock dividend, stock split,
combination, reclassification or similar event affecting the Series
A Convertible Preferred Stock. There are no dividends payable on
the Series A Convertible Preferred Stock. Each holder of
outstanding shares of Series A Convertible Preferred Stock shall be
entitled to cast the number of votes for the Series A Convertible
Preferred Stock in an amount equal to the number of whole shares of
common stock into which the shares of Series A Convertible
Preferred Stock held by such holder are convertible as of the
record date for determining stockholders entitled to vote on such
matter
The
Series A Preferred Stock also had a “down-round” protection feature
provided to the investors if the Company subsequently issued or
sold any shares of common stock, stock options, or convertible
securities at a price less than the conversion price of $1.00 per
common share. The conversion price was automatically adjustable
down to the price of the instrument being issued. As a result of
conversions during the year ended December 31, 2020, the Series A
Preferred Stock conversion price was reset to $0.00006 per
share.
As of
December 31, 2020, the 13 preferred shareholders holding 750,000
preferred shares can convert to 12.5 billion shares of common
stock, which was significantly more than the outstanding common
stock at that time. As of December 31, 2020, there are currently
2,401,396,041 shares outstanding. The Company has increased its
authorized shares to 10 billion shares in May of 2020, addressing
the potential Company control issue if conversion of all the
preferred shares were to occur at the same time.
Upon
any liquidation, dissolution or winding-up of the Company under
Texas law, whether voluntary or involuntary, the holders of the
shares of Series A Convertible Preferred Stock shall be paid an
amount equal to the aggregate stated value of their shares of
Series A Convertible Preferred Stock, before any payment shall be
paid to the holders of common stock, or any other stock ranking on
liquidation junior to the Series A Convertible Preferred Stock, an
amount for each share of Series A Convertible Preferred Stock held
by such holder equal to the sum of the Stated Value
thereof.
As at
December 31, 2020, there were 750,000 shares of Series A
Convertible Preferred Stock issued and outstanding.
On August 27, 2021, Indoor Harvest Corp (the “Company”) completed
an initiative when it entered into a Modification Agreement (the
“Modification”) in cooperation with the current Series A Preferred
shareholders to modify their conversion privileges to align and
support current management team initiatives and shareholder
interests. The modification agreement provides the Preferred
shareholders the ability to convert into common shares at a
conversion price at the lower of $0.40 (per the original
agreement), or the subsequent per share pricing of a future
equity raise greater than Five Hundred Thousand ($500,000) Dollars.
This Modification is forecasted to support anti- dilutive
measures potentially to the benefit of our shareholders and may
allow the Company to proceed with plans relating to funding
needs.
Transfer
Agent and Registrar
VStock
Transfer, LLC at 18 Lafayette Place, Woodmere, New York 11598 is
the registrar and transfer agent for our common stock. Their
telephone number is (212) 828-8436.
Warrants
There
were no outstanding warrants as of December 31, 2020.
Options
There
are no outstanding options to purchase our securities as of
December 31, 2020.
Recent Sales of Unregistered Securities
During
the year ended December 31, 2020, we issued shares of our common
stock that were not registered under the Securities Act, and were
not previously disclosed in a Current Report on Form 8-K or on a
Quarterly Reports on Form 10-Q as follows:
During
the year ended December 31, 2020, the Company issued 2,200,358,737
shares of common stock as follows:
|
|
● |
2,021,006
shares to consultant valued at $72,920 for consulting
services |
|
|
|
|
|
|
● |
2,198,337,731
shares for conversion of debt of $1,412,106 |
We
relied upon Section 4(a)(2) of the Securities Act of 1933, as
amended for the above issuances to U.S. citizens or residents. We
believe that Section 4(a)(2) of the Securities Act of 1933 was
available because:
|
|
● |
None
of these issuances involved underwriters, underwriting discounts or
commissions. |
|
|
|
|
|
|
● |
Restrictive
legends were and will be placed on all certificates issued as
described above. |
|
|
|
|
|
|
● |
The
distribution did not involve general solicitation or
advertising. |
|
|
|
|
|
|
● |
The
distributions were made only to investors who were sophisticated
enough to evaluate the risks of the investment. |
In
connection with the above transactions, although some of the
investors may have also been accredited, we provided the following
to all investors:
|
|
● |
Access
to all our books and records. |
|
|
|
|
|
|
● |
Access
to documents relating to our operations. |
|
|
|
|
|
|
● |
The
opportunity to obtain any additional information, including
information relating to all of our agreements with third parties
which were only oral and not written, to the extent we possessed
such information, and including all information necessary to verify
the accuracy of the information to which the investors were given
access. |
Prospective
investors were invited to review at our offices at any reasonable
hour, after reasonable advance notice, any materials available to
us concerning our business. Prospective Investors were also invited
to visit our offices.
Item 6. Selected Financial
Data.
Not
required.
Item 7. Management’s Discussion and
Analysis Of Financial Condition and Results Of
Operations.
The
discussion of our financial condition and results of operations and
business and related within this document should be read in
conjunction with our financial statements and the related notes,
and other financial information included in this filing. Our
Management’s Discussion and Analysis contains not only statements
that are historical facts, but also statements that are
forward-looking. Forward-looking statements are, by their very
nature, uncertain and risky. Consequently, and because
forward-looking statements are inherently subject to risks and
uncertainties, the actual results and outcomes may differ
materially from the results and outcomes discussed in the
forward-looking statements. You are urged to carefully review and
consider the various disclosures made by us in this report as we
attempt to advise interested parties of the risks and factors that
may affect our business, financial condition, and results of
operations and prospects.
Forward-Looking
Statements
The
following discussion of our financial condition and results of
operations should be read in conjunction with our audited financial
statements and the related notes, and other financial information
included in this filing.
Our
Management’s Discussion and Analysis contains not only statements
that are historical facts, but also statements that are
forward-looking. Forward-looking statements are, by their very
nature, uncertain and risky. These risks and uncertainties include
international, national, and local general economic and market
conditions; our ability to sustain, manage, or forecast growth; our
ability to successfully make and integrate acquisitions; new
product development and introduction; existing government
regulations and changes in, or the failure to comply with,
government regulations; adverse publicity; competition; the loss of
significant customers or suppliers; fluctuations and difficulty in
forecasting operating results; change in business strategy or
development plans; business disruptions; the ability to attract and
retain qualified personnel; the ability to protect technology; the
risk of foreign currency exchange rate; and other risks that might
be detailed from time to time in our filings with the Securities
and Exchange Commission.
You
are urged to carefully review and consider the various disclosures
made by us in this report and in our other reports as we attempt to
advise interested parties of the risks and factors that may affect
our business, financial condition, and results of operations and
prospects.
Overview
Indoor
Harvest, through its brand name Indoor Harvest®, is focused on
leveraging its investment and experience in Vertical Farming,
Building Integrated Agriculture, Controlled Environment Agriculture
and Aeroponic Cultivation technology with other synergistic
enterprises in the Cannabis industry as part of an
M&A/consolidation and integration strategy.
The
company spent the majority of 2020 reorganizing, restructuring, and
repositioning the business.
The
Company was funded through a convertible note structure from 2017
into 2019, that allowed the Company to keep being active while we
restructure, reposition and recapitalize the company. We continue
to seek funding from other capital sources as we position the
company for future growth.
As
part of a restructuring and recapitalization effort the Company
plans to regularly increases the number of shares of common stock
the Company is authorized to issue. We believe this will enable the
Company to raise additional capital by allowing funding sources to
be able to convert debt to shares, a common form of funding, and to
utilize shares as currency for future M&A transactions or
related strategic initiatives.
Raising
new capital is critical to the Company going forward and is a
primary focus as SEC filings are being completed and brought
current.
Our
current strategy is positioning the Company as an integration and
consolidation platform offering other cannabis and hemp companies
the potential to be part of a bigger opportunity, sharing
intellectual capital, business networks, technology, and access to
new capital markets with liquidity for investors. We will analyze
cannabis and hemp companies focused on Genetics, Tissue Culture,
Controlled Environment Ag technologies, including high pressure
Aeroponic Cultivation, Cultivation operations, robotics and AI,
Hemp, CBD and other CPG related products.
Our
operational expenditures will primarily focus on review of existing
assets, vetting potential M&A targets and related due diligence
costs, as well as the necessary costs related to being a fully
reporting company with the SEC.
On
March 5, 2020, The Company entered into a material definitive
agreement with Fincann Corp., a New York corporation (the
“Fincann”). Fincann provides banking related strategies or
solutions for the cannabis-related industry through a growing
consortium of financial institutions, to help marijuana-related
businesses (MRBs) to access essential banking services without
complicated workarounds. Due diligence efforts are
ongoing.
The
Company is in the process of establishing a
headquarters.
We
are an “emerging growth company” (“EGC”) that is exempt from
certain financial disclosure and governance requirements for up to
five years as defined in the Jumpstart Our Business Startups Act
(“the JOBS Act”), that eases restrictions on the sale of
securities; and increases the number of shareholders a company must
have before becoming subject to the SEC’s reporting and disclosure
rules. We have elected to use the extended transition period for
complying with new or revised accounting standards under Section
102(b)(2) of the JOBS Act, that allows us to delay the adoption of
new or revised accounting standards that have different effective
dates for public and private companies until those standards apply
to private companies. Because of this election, our financial
statements may not be comparable to companies that comply with
public company effective dates.
Results of Operations
The
following summary of our results of operations should be read in
conjunction with our consolidated financial statements for the
years ended December 31, 2020 and 2019, which are included
herein.
For
the year ended December 31, 2020 compared to the year ended
December 31, 2019
Our
operating results for the years ended December 31, 2020 and 2019
and the changes between those periods for the respective items are
summarized as follows:
| |
|
Year Ended |
|
|
|
|
|
|
|
| |
|
December
31, |
|
|
|
|
|
|
|
| |
|
2020 |
|
|
2019 |
|
|
Change |
|
|
% |
|
| Revenue |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
- |
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense |
|
|
0 |
|
|
|
11,147 |
|
|
|
(11,147 |
) |
|
|
(100 |
)% |
| Stock based
compensation |
|
|
0 |
|
|
|
111,553 |
|
|
|
(111,553 |
) |
|
|
(100 |
)% |
| Professional
fees |
|
|
223,788 |
|
|
|
310,588 |
|
|
|
(86,800 |
) |
|
|
(28 |
)% |
|
General and administrative expenses |
|
|
24,327 |
|
|
|
199,432 |
|
|
|
(175,105 |
) |
|
|
(88 |
)% |
| Total
operating expenses |
|
|
248,115 |
|
|
|
632,720 |
|
|
|
(384,605 |
) |
|
|
(61 |
)% |
| Loss from
operations |
|
|
(248,115 |
) |
|
|
(632,720 |
) |
|
|
(384,605 |
) |
|
|
(61 |
)% |
|
Other expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(382,370 |
) |
|
|
(135,844 |
) |
|
|
246,526 |
|
|
|
181 |
% |
| Amortization of
debt discount |
|
|
(140,913 |
) |
|
|
(157,631 |
) |
|
|
16,718 |
|
|
|
(10 |
)% |
|
Change in fair value of embedded derivative liability |
|
|
(45,509,377 |
) |
|
|
(2,170,626 |
) |
|
|
43,338,751 |
|
|
|
1,997 |
% |
|
Total other expense |
|
|
(46,032,660 |
) |
|
|
(2,464,101 |
) |
|
|
43,568,559 |
|
|
|
1,768 |
% |
| Net
loss |
|
$ |
(46,280,775 |
) |
|
$ |
(3,096,821 |
) |
|
$ |
(43,183,954 |
) |
|
|
1,394 |
% |
Revenues
During
the years ended December 31, 2020 and 2019, the Company generated
no revenue.
Operating Expenses
Total
operating expenses for the year ended December 31, 2020 and 2019
were $248,115 and $632,720 , respectively, for an aggregate
decrease of $384,605 or 61%. The aggregate decrease is primarily
related to 100% decrease in stock-based compensation, a 28%
decrease in professional fees of $86,800 and an 88% decrease in
general and administrative expenses of $175,105.
Other Expense
Total
other expense for the year ended December 31, 2020 and 2019 were
$$46,032,660 and $2,464,101 , respectively, for an increase of
$43,568,559 or 1768%. The increase is primarily related to the
change in the fair value of the embedded derivative liability of
$43,568,559 related to the Tangiers convertible notes payable and
Series A Preferred Stock, and a 181% increase in interest expenses
of $246,526.
Net Loss
As a
result of the factors discussed above, net loss for the year ended
December 31, 2020 and 2019 was $46,280,775 and $3,096,821,
respectively, for an increase of $43,183,954 or 1394%.
Liquidity
and Capital Resources
The
following table provides selected financial data about our Company
as of December 31, 2020 and December 31, 2019,
respectively.
Working
Capital
| |
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
| |
|
2020 |
|
|
2019 |
|
|
Change |
|
|
% |
|
| Current assets |
|
$ |
3,083 |
|
|
$ |
17,684 |
|
|
$ |
(14,601 |
) |
|
|
(83 |
)% |
| Current
liabilities |
|
$ |
44,752,523 |
|
|
$ |
4,331,080 |
|
|
$ |
40,421,443 |
|
|
|
936 |
% |
| Working capital
(deficiency) |
|
$ |
(44,749,523 |
) |
|
$ |
(4,313,396 |
) |
|
$ |
(40,436,127 |
) |
|
|
937 |
% |
Cash
Flows
| |
|
Year Ended |
|
|
|
|
|
|
|
| |
|
December
31, |
|
|
|
|
|
|
|
| |
|
2020 |
|
|
2019 |
|
|
Change |
|
|
% |
|
| Cash used in operating
activities |
|
$ |
17,452 |
|
|
$ |
441,602 |
|
|
$ |
(424,150 |
) |
|
|
(96 |
)% |
| Cash used in investing activities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
|
- |
|
| Cash provided by financing
activities |
|
$ |
6,306 |
|
|
$ |
298,273 |
|
|
$ |
(291,967 |
) |
|
|
(98 |
)% |
| Net Change in Cash During Period |
|
$ |
(11,146 |
) |
|
$ |
(143,329 |
) |
|
$ |
(132,183 |
) |
|
|
(92 |
)% |
As of
December 31, 2020, our Company’s cash balance was $1,207 and total
assets were $3,083. As of December 31, 2019, our Company’s cash
balance was $12,353 and total assets were $24,989.
As of
December 31, 2020, our Company had total liabilities of
$44,752,523, compared with total liabilities of $4,331,080 as at
December 31, 2019.
As of
December 31, 2020, our Company had a working capital deficiency of
$44,749,440 compared with a working capital deficiency of
$4,313,396 as of December 31, 2019. The increase in working capital
deficiency was primarily attributed to an increase in derivative
liabilities of $40,436,127.
Cash
Flow from Operating Activities
Net
cash used in operating activities for the year ended December 31,
2020 and 2019 were $17,452 and $441,602, respectively, for a
decrease of $424,150. The improvement in net cash used in operating
activities is primarily related to a decrease in operating
expenses, from reductions in professional fees and general and
administrative expenses.
Cash
Flow from Investing Activities
During
the year ended December 31, 2020 and 2019, we had no cash used in
investing activities.
Cash
Flow from Financing Activities
Net
cash provided by financing activities for the year ended December
31, 2020 and 2019 were $6,306 and $298,273, respectively, for a
decrease of $291,967. During the year December 31, 2020, the
Company received $10,000 by way of a loan under a convertible note
payable and repaid note payable of $3,964. During the year December
31, 2019, the Company received $307,304 by way of loan under a
convertible note payable and repaid note payable of
$9,131.
Off-Balance
Sheet Arrangements
We
have no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources that is material to stockholders
Critical
Accounting Policies and Estimates
For a
discussion of our accounting policies and related items, please see
the Notes to the Financial Statements, included in Item
8.
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk.
Not
required.
Item 8. Financial Statements and
Supplementary Data.
The
consolidated financial statements and Reports of Independent
Registered Public Accounting Firms are listed in the “Index to
Consolidated Financial Statements” on page F-1 and included on
pages F-2 through F-23.
Item 9 – Changes in and Disagreements
With Accountants on Accounting and Financial
Disclosures.
On
November 15, 2019, the Company replaced Thayer O’Neal Company with
WWC, P.C. as our independent principal accountant to audit the
Company’s financial statements.
Item 9A – Controls and
Procedures.
Evaluation
of Disclosure Controls and Procedures
The
Company’s Chief Executive Officer (the principal executive officer
and principal financial officer) have evaluated the effectiveness
of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of
December 31, 2020. Based upon such evaluation, Chief Executive
Officer (the principal executive officer and principal financial
officer) have concluded that, as of December 31, 2020, the
Company’s disclosure controls and procedures were not
effective.
Management’s
Report on Internal Control over Financial Reporting
Under
the supervision and with the participation of our management,
including our Chief Executive Officer (the principal executive
officer and principal financial officer), we conducted an
evaluation of the effectiveness of our internal control over
financial reporting as of December 31, 2020, based on the framework
stated by the Committee of Sponsoring Organizations of the Treadway
Commission’s 2013 Framework.
Our
management is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined
in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal
control system was designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes, in
accordance with generally accepted accounting principles. Because
of inherent limitations, a system of internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate due to
change in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Based
on its evaluation as of December 31, 2020, our management concluded
that our internal controls over financial reporting were not
effective as of December 31, 2020 due to the material weaknesses
set forth below. A material weakness is a deficiency, or a
combination of control deficiencies, in internal control over
financial reporting such that there is a reasonable possibility
that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely
basis.
Because
of the Company’s limited resources, there are limited controls over
financial information processing. The Company determined that its
internal control over financial reporting was not effective as of
December 31, 2020. The basis for the conclusions that such internal
control was ineffective included the following
considerations:
|
|
● |
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. |
|
|
|
|
|
|
● |
Additionally,
there is a lack of 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. |
Material
risks associated with the above issues include the
following:
|
|
● |
Because
the Company currently has insufficient written policies and
procedures with regard to financial reporting, this could cause the
Company to be inefficient and potentially encounter errors in
preparing its financial reports due to the lack of a written policy
for the company to follow. |
|
|
|
|
|
|
● |
Because
there is a lack of formal process and timeline, this cold lead the
Company not to be able to timely prepare its financial statements
and could cause it to either file a report late or to a file a
report which may contain some errors. |
|
|
|
|
|
|
● |
Because
the Company’s management is composed of a small number of persons,
there is a lack of segregation of duties. |
This
report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal
control over financial reporting. We were not required to have, nor
have we, engaged the Company’s independent registered public
accounting firm to perform an audit of internal control over
financial reporting pursuant to the rules of the Securities and
Exchange Commission that permit us to provide only management’s
report in this annual report.
Changes
in Internal Controls over Financial Reporting
There
has been no change in our internal control over financial reporting
identified in connection with the evaluation required by paragraph
(d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred
during the quarter ended December 31, 2020 that has materially
affected or is reasonably likely to materially affect our internal
control over financial reporting.
Item 9B. Other
Information.
None.
PART III
Item 10. Directors, Executive Officers
and Corporate Governance.
The
following sets forth our Officers and Directors as of December 31,
2020 . The Board of Directors elects our Executive Officers
annually. Our Directors shall be elected for the term of one year,
and until their successors are elected and qualified, or until
their earlier resignation or removal. Our Officers also shall be
elected for the term of one year, and until a successor is elected
and qualified, or until an earlier resignation or removal. Our
Directors and Executive Officers are as follows:
|
Name |
|
Position |
|
Age |
|
Thomas
Cook |
|
Chief
Executive and Chief Financial Officer |
|
55 |
|
Leslie
Bocskor |
|
Incoming
Chief Executive and Chief Financial Officer |
|
55 |
|
Rick
Gutshall |
|
Director |
|
46 |
|
Dr.
Lang Coleman |
|
Director |
|
66 |
Effective
May 15, 2019, the Company (Registrant) mutually and amicably
arranged with departing officer and Director Daniel Weadock, for
him to transition to an advisor to the Registrant. Thus, Mr.
Weadock no longer serves in any officer or Director capacity. As
part of a non-material arrangement, subject to the Board monthly
requests, Mr. Weadock focuses include consulting on potential
acquisitions, among other things. The Board confirmed typical
consulting arrangements to apply moving forward, including some
shares of common stock, 100,000, potential future stock and other
considerations, indemnifications, and reimbursement of
expenses.
Effective
May 15, 2019, the Board of Directors has appointed Thomas Cook to
act as interim principal accounting officer and principal executive
officer serving in the capacity of interim CEO and interim CFO with
non-material arrangements to apply moving forward, including
compensation of $2,500 monthly, potential stock and other
considerations, indemnifications and reimbursement of expenses. Mr.
Cook owns no Company securities at this time. While Mr. Cook is
acting CEO and CFO, the Company sees him serving in a limited role
while it is actively seeking new CEO and CFO candidates to serve on
long term basis, with education and experiences to fit the Company
2020 plans.
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.
Thomas Cook. Mr. Cook, age 54, was appointed as interim
Chief Executive Officer and interim Chief Financial Officer to the
Company effective May 15, 2019. His appointment was for limited
attention and services while the Company restructures management,
business and seeks potential long-term CEO and CFO candidates. Mr.
Cook has years of experience dealing with management teams of
companies, private and public, and law firms, financial firms, and
others and is skilled at dynamic communication, governmental
filings compliance (mostly on a state basis), follow-up skills, and
organizational record keeping. He has about 22 years account
management experience within the corporate compliance industry,
approximately 10 years of which was with CT Corporation, a Wolters
Kluwer company. He founded his own compliance firm, TCE Compliance
Services, about 8 years ago and assists the Company, for nominal
compensation, on certain standard corporate filing services. He
honorably served and was discharged, the United States Marine
Corps, 1984 to 1988.
Rick Gutshall. Mr. Gutshall served as our Interim Chief
Executive Officer from August 2017 to February 20, 2018 and has
served as a member of our Board of Directors since August 2017 and
served as our Chief Financial Officer from August 2017 to December
2017. Since 2016, Mr. Gutshall has served as Chief Financial
Officer of Alamo CBD LLC, and since 1999, he has served as a
principal of KW Gutshall & Associates (“KW Gutshall”). Mr.
Gutshall is responsible for personalized financial planning, wealth
management and retirement planning for clients at KW Gutshall and
has been a licensed financial advisor since 1997. Mr. Gutshall
received his Bachelor of Business Administration, Management and
Operations from Concordia University-Austin in 1997. As a member of
the Board, Mr. Gutshall will contribute the benefits of his
executive leadership and management experience in finance, business
development, contract negotiations and public speaking. On February
20, 2018, Mr. Rick Gutshall resigned as Interim Chief Executive
Officer of the Company.
Dr. Lang Coleman. In August 2017, Dr. Lang Coleman was
appointed as a member of the Board. Dr. Coleman is a proud disabled
Army veteran, long-time Texas resident, and psychologist
specializing in Neuropsychology. Dr. Coleman received his B.S. and
M.A. from Austin Peay State University in Clarksville, Tennessee,
his Ph.D. in Clinical Psychology from the University of Kansas, and
he attended law school at the University of Texas at Austin. Dr.
Coleman completed his medical internship at William Beaumont Army
Medical Center in El Paso, Texas, and spent 22 years, from 1972
through 1994, in U.S. Army Psychiatry. A pensioned Army Officer and
decorated combat veteran, Dr. Coleman formerly directed soldiers
and planned both treatments and evacuations for psychiatric
casualties in a theatre of war for over 30,000 soldiers and
marines. From his time as an Army Major, he has extensive knowledge
and experience with chain of custody in his dealings with
deliverables ranging from drug-testing biological samples to
weapons and ordinance and holds the Combat Medical Badge. After
serving 17 years, from 1998 through 2015, Dr. Coleman retired as a
tenured professor of psychology at St. Philip’s College in San
Antonio, Texas, where he taught Abnormal Psychology and Statistics
courses. Dr. Coleman authored curriculum in 1994 for a juvenile
justice alternative education program and licensed the copyright,
for one year, to The Key Corporation. The school was successfully
launched in Dallas. As the CEO of Alamo CBD since March 2017, Dr.
Coleman has regularly facilitated, sponsored and participated in
many community activities. He has frequently appeared on television
and at the Texas State Capital as an advocate for the
Compassionate-Use Program. As a member of the Board, Dr. Coleman
will contribute the benefits of his military experience treating
veterans with post-traumatic stress disorder, or PTSD, and other
medical conditions and will manage the Company’s medical and
science policy and procedures. His contributions and deep
understanding of all aspects of our business and industry will
provide considerable experience in developing the Company’s medical
and scientific procedures and policies.
Leslie
Bocskor. Mr. Bocskor is the Chairman and founder of Electrum
Partners or “EP.” EP is involved in a variety of related industry
ventures and consulting. He is a recognized industry consultant in
the legal cannabis area and interacts with mainstream media often
being featured, including Forbes, CNBC, The Wall Street Journal,
and more. He formed Electrum Partners in 2014 and became the
founding Chairman of the Nevada Cannabis Industry Association
(NVCIA). He is an active speaker at industry conferences, including
the ArcView Group. Leslie began his career at Lehman Brothers and
later went on to co-found Mason Cabot, a New York based investment
bank focused on emerging technologies and finance. In 2005, he
served as Managing Partner with Lennox Hill Partners. Bocskor often
advised politicians, industry leaders, and investment firms who
seek out his groundbreaking analysis and insight into the cannabis
economy.
Prior
Management.
Daniel
Weadock. On February 20, 2018, Mr. Daniel Weadock was appointed
Chief Executive Officer and Director of the Company. Since August
2017, Mr. Weadock was Co-Founder and CEO of Junebug Technologies,
LLC, a next generation microbial biotechnology company focused on
developing solutions based on photosynthetic bacteria and other
versatile microorganisms. Since 2005, Mr. Weadock also has served
as President and CEO of The International in Bolton, Massachusetts,
a world class golf and special event destination with its own
boutique lodge and signature restaurant. As a change maker, he led
a cultural and business transformation, from a very traditional and
conservative enterprise to a more modern, open and forward-thinking
organization. Prior to 2005, Mr. Weadock served as Vice President
of Enterprise Sales for Williams Telecommunications from 2002
through 2004, building a new sales team and opening new doors in
enterprise markets. From 1999 through 2001, Mr. Weadock served as
Co-Founder and CEO of FilmAxis, an online, broadband virtual film
market, where he led business plan development and capital raising.
Prior to FilmAxis, Mr. Weadock was an Executive Vice President of
Consortio from 1999 through 2000, a Seattle, Washington incubator
of internet-based business to business communities, where he led
business development. Before joining Consortio, Mr. Weadock spent a
year working with Fast Engines as their VP of Sales and President,
from 1998 through 1999, his first start up in Cambridge,
Massachusetts, a small software development company. Prior to Fast
Engines, Mr. Weadock spent more than 10 years with Cable &
Wireless Plc in a variety of roles around the world. After landing
what was at the time one of the largest data networking
infrastructure deals in Cable & Wireless’ history, Mr. Weadock
was awarded a Fellowship to MIT’s Sloan School of Management where
he earned a Master of Science in Management. Mr. Weadock is a
forward-thinking visionary who will bring his many years of
experience as a thought leader and an agent of change to the next
stage of the Company’s development. As a member of the board, Mr.
Weadock contributes the benefits of his executive leadership and
management experience in developing corporate strategy, assessing
emerging industry trends, and business operations. The Company
believes that his contributions and deep understanding of all
aspects of our business, products and markets will provide
substantial experience to fuel our corporate growth.
Family
Relationships
There
are no family relationships between any director or executive
officer.
Involvement
in Certain Legal Proceedings
No
officer, director, or persons nominated for such positions,
promoter or significant employee has been involved in the last ten
years, to our belief, in any of the following:
|
|
● |
Any
bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time, |
|
|
|
|
|
|
● |
Any
conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses), |
|
|
|
|
|
|
● |
Being
subject to any order, judgment, or decree, not subsequently
reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities, |
|
|
|
|
|
|
● |
Being
found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the
judgment has not been reversed, suspended, or vacated. |
|
|
|
|
|
|
● |
Having
any government agency, administrative agency, or administrative
court impose an administrative finding, order, decree, or sanction
against them as a result of their involvement in any type of
business, securities, or banking activity. |
|
|
|
|
|
|
● |
Being
the subject of a pending administrative proceeding related to their
involvement in any type of business, securities, or banking
activity. |
|
|
|
|
|
|
● |
Having
any administrative proceeding been threatened against you related
to their involvement in any type of business, securities, or
banking activity. |
Item 11. Executive
Compensation.
The
table below summarizes all compensation awarded to, earned by, or
paid to each named executive officer for the Company’s last
completed fiscal year of 2020 for all services rendered to the
Company.
|
Name and Position |
|
Year |
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
(1)
|
|
|
Option
Awards
($)
|
|
|
Non-Equity
Incentive Plan Compensation
($)
|
|
|
Nonqualified
Deferred Compensation
($)
|
|
|
All
Other Compensation
($)
|
|
|
Total
($)
|
|
| Chad Sykes, former CEO,
Secretary |
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
| |
|
|
2019 |
|
|
$ |
48,077 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
48,077 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Daniel Weadock, Former CEO |
|
|
2020
|
|
|
|
0 |
|
|
|
|
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
0 |
|
| |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
$ |
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
13 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Rick Gutshall |
|
|
2020 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
| Former interim CEO and Former CFO
(3) |
|
|
2019 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
| Thomas Cook |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
18,750 |
|
|
$ |
18,750 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Leslie Bocskor |
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
(1) |
For
valuation purposes, the dollar amount shown is calculated based on
the market price of the common stock on the grant dates. The number
of shares granted, the grant date, and the market price of such
shares for each named executive officer is set forth
below. |
|
|
|
|
(2) |
Chad
Sykes, Founder, resigned as CEO, Secretary on January 2, 2017 and
was appointed Chief Innovation Officer. On August 9, 2017, Mr.
Sykes resigned from his position as Chief Innovation Officer. In
March, 2019, Mr. Sykes resigned from his executive officer
positions with the Company. |
|
|
|
|
(3) |
Mr.
Gutshall served as the Company’s Chief Financial Officer from
August 2017 to December 2017, and as the Company’s Interim Chief
Executive Officer from August 2017 to February 20, 2018. On
February 20, 2018, Mr. Rick Gutshall resigned as Interim Chief
Executive Officer of the Company. Mr. Gutshall was not compensated
in any way by the Company relating to his services as the Company’s
Interim Chief Executive Officer or as the Company’s Chief Financial
Officer in 2017. Mr. Gutshall did receive 758,401 shares of the
Company’s common stock in connection with the Alamo Merger,
however, such share issuance was not in any way connected or
related to Mr. Gutshall’s previous officer positions with the
Company nor his position as a director of the Company. |
Employment Agreements
Past
Agreements-Daniel Weadock, Chief Executive Officer and
Director
On
February 20, 2018, Mr. Daniel Weadock was appointed Chief Executive
Officer and Director of the Company. On February 20, 2018, the
Company entered into an executive employment agreement with Mr.
Weadock (the “Weadock Employment Agreement”), pursuant to which Mr.
Weadock agreed to act as the Company’s chief executive officer.
Pursuant to the terms of the Weadock Employment Agreement, Mr.
Weadock will initially not receive a salary. However, effective on
the business day after the date on which the Company achieves
Capitalization of $2,000,000 or more, Mr. Weadock’s annual base
salary will be $100,000. For purposes of the Weadock Employment
Agreement, “Capitalization” means aggregate net cash proceeds
received by the Company from (a) the Company’s sale of common stock
pursuant to Puts (as such term is defined in the Investment
Agreement dated as of October 12, 2017 by and between the Company
and Tangiers Global, LLC (the “Investment Agreement”)) under the
Investment Agreement, and/or (b) any other sale by the Company of
common stock or preferred stock, whether in a public offering or a
private placement. In addition, pursuant to the terms of the
Weadock Employment Agreement, the Company agreed to grant Mr.
Weadock (i) 300,000 shares of restricted stock as soon as
administratively practicable following execution of the Weadock
Employment Agreement, and (ii) 1,584,202 shares of restricted
common stock, consistent with the grant and vesting schedule set
forth in the Weadock Employment Agreement; provided,
however, that no grant will be made and no shares will be
issued with respect to any grant if Mr. Weadock is not employed by
the Company as an executive on the respective Date of Grant as set
forth in the Weadock Employment Agreement. The Weadock Employment
Agreement has a term of one year, unless Mr. Weadock’s employment
is terminated sooner by the board of directors, and the term will
be extended for additional one-year periods unless the Company or
Mr. Weadock gives the other party at least 30 days’ prior written
notice of its intent not to renew.
On
February 20, 2018, the Company also entered into a compensation
agreement with Mr. Weadock (the “Director Compensation Agreement”).
Pursuant to the terms of the Director Compensation Agreement, the
Company agreed to grant Mr. Weadock an aggregate of 240,000 shares
of restricted shares of common stock of the Company, consistent
with the grant and vesting schedule set forth in the Director
Compensation Agreement; provided, however, that no grant will be
made and no shares will be issued with respect to any grant, if Mr.
Weadock is not a member of the Company’s board of directors on the
respective Date of Grant as set forth in the agreement. If the
Company is acquired by, or merged into and with, another entity
prior to the last Date of Vesting set forth in the agreement (i.e.
February 23, 2022), all shares issuable to Mr. Weadock under the
Director Compensation Agreement will become fully vested and
non-forfeitable. The Company also agreed to reimburse Mr. Weadock
for all reasonable travel and incidental expenses incurred by Mr.
Weadock in performing his services and attending meetings as
approved in advance by the Company.
Additionally,
on February20, 2018, the Company entered into an indemnity
agreement with Mr. Weadock (the “Weadock Indemnity Agreement”).
Pursuant to the terms of the Weadock Indemnity Agreement, the
Company agreed to use reasonable efforts to obtain and maintain in
full force and effect directors’ and officers’ liability insurance
(“D&O Insurance”) in reasonable amounts from established and
reputable insurers; provided, however, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company
determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage
is reduced by exclusions so as to provide an insufficient benefit,
or Mr. Weadock is covered by similar insurance maintained by a
subsidiary of the Company. In addition the foregoing, the Company
will indemnify Mr. Weadock from certain third party actions,
derivative actions and actions where Mr. Weadock is decreased;
provided, however, the Company shall not be obligated to indemnify
Mr. Weadock for actions including, but not limited to, actions
initiated by Mr. Weadock, for any action in which it is determined
that the material assertions made by Mr. Weadock in such proceeding
were not made in good faith or were frivolous, for any settlements
not authorized by the Company, for any actions on the account of
Mr. Weadock’s willful misconduct, and for any expenses and the
payment of profits arising from the purchase and sale Mr. Weadock
of securities in violation of Section 16(b) of the Securities
Exchange Act, or any similar successor statute; provided, further
that, that the Company shall not be obligated to indemnify Mr.
Weadock for expenses or liabilities of any type whatsoever which
have been paid directly to Mr. Weadock pursuant to the Company’s
D&O Insurance policy.
Mr.
Weadock no longer has an employment agreement.
Rick
Gutshall, Former Interim Chief Executive Officer and Current
Director
Mr.
Gutshall served as our Interim Chief Executive Officer from August
2017 until February 2018 as a member of our Board of Directors
since August 2017, and as our Chief Financial Officer from August
2017 to December 2017. On August 9, 2017, the Company entered into
a director agreement (the “Gutshall Director Agreement”),
employment agreement (the “Gutshall Employment Agreement”) and an
indemnity agreement (the “Gutshall Indemnity Agreement”) with Rick
Gutshall. The Gutshall Employment Agreement commenced on August 9,
2017.
Pursuant
to the terms of the Gutshall Director Agreement, Mr. Gutshall shall
serve as a member of the Company’s Board and will receive a stock
award in such amount as determined by the Board upon the earlier of
(i) 30 days from August 9, 2017 and (ii) the closing of a financing
pursuant to which the Company receives a minimum of $500,000 in
proceeds. In addition, Mr. Gutshall shall be reimbursed for all
reasonable travel and other incidental expenses incurred in the
performance of his services, including attendance at meetings, as
approved by the Company.
Pursuant
to the terms of the Gutshall Employment Agreement, Mr. Gutshall
agreed to serve as Interim Chief Executive Officer and Chief
Financial Officer of the Company. The initial term of the agreement
will expire on August 9, 2018 and commencing on August 9, 2018 and
on each anniversary of such date thereafter, the term of the
Gutshall Employment Agreement shall automatically renew for
one-year periods, unless earlier terminated pursuant to the terms
of the Gutshall Employment Agreement. In consideration for Mr.
Gutshall’s services, the Board shall determine Mr. Gutshall’s
compensation upon the earlier of (i) 30 days from August 9, 2017
and (ii) the closing of a financing pursuant to which the Company
receives a minimum of $500,000 in proceeds. On February 20, 2018,
Mr. Rick Gutshall resigned as Interim Chief Executive Officer of
the Company.
Effective May 15, 2019, the Board of Directors appointed Thomas
Cook to act as interim principal accounting officer and principal
executive officer serving in the capacity of interim CEO and
interim CFO with non-material arrangements to apply moving forward,
including compensation of $5,000 and 10,000 shares monthly,
potential stock and other considerations, indemnifications and
reimbursement of expenses. While Mr. Cook was the acting CEO and
CFO, the Company sees him serving in a limited role while it is
actively seeking new CEO and CFO candidates to serve on long term
basis, with education and experiences to fit the Company 2020
plans. As of December 31, 2019, the Company recorded accrued
management fee of $9,000. On May 11, 2020, Mr. Cook resigned his
positions with the Company.
Retirement
Benefits
We do
not currently provide our named executive officers with
supplemental or other retirement benefits.
Outstanding
Equity Awards at December 31, 2020
As of
December 31, 2020, we had not granted any stock-based compensation
awards to any of our named executive officers. A total, however, of
100,000 shares of common stock were awarded to Daniel Weadock for
2018 per his 2018 employment agreement.
Director
Compensation
No
compensation applies to Directors.
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.
As of
December 31, 2020, the preferred shareholders can convert and own
12.5 Billion shares of common stock if they elect to do so. The
following table illustrates the year-end potential fully diluted
shares as of December 31, 2020 and 2019. The shares issued and
outstanding on Dec 31 2020 was 201,037,304.
For
the year ended December 31, 2020 and 2019, 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.
| |
|
Years
ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
(shares) |
|
|
(shares) |
|
| |
|
|
|
|
|
|
| Series A Preferred
Stock |
|
|
12,500,000,000 |
|
|
|
1,214,574,899 |
|
| Convertible
notes |
|
|
149,922,109 |
|
|
|
1,197,242,200 |
|
| |
|
|
12,649,922,109 |
|
|
|
2,411,817,099 |
|
The
following table sets forth the ownership, as of the this date of
our common stock by each person known by us to be the beneficial
owner of more than 5% of our outstanding common stock, our
director, and our executive officer and director as a group. To the
best of our knowledge, the persons named have sole voting and
investment power with respect to such shares, except as otherwise
noted. There are no pending or anticipated arrangements that may
cause a change in control.
The
information presented below regarding beneficial ownership of our
voting securities has been presented in accordance with the rules
of the Securities and Exchange Commission and is not necessarily
indicative of ownership for any other purpose. Under these rules, a
person is deemed to be a “beneficial owner” of a security if that
person has or shares the power to vote or direct the voting of the
security or the power to dispose or direct the disposition of the
security. A person is deemed to own beneficially any security as to
which such person has the right to acquire sole or shared voting or
investment power within 60 days through the conversion or exercise
of any convertible security, warrant, option or other right. More
than one person may be deemed to be a beneficial owner of the same
securities. The percentage of beneficial ownership by any person as
of a particular date is calculated by dividing the number of shares
beneficially owned by such person, which includes the number of
shares as to which such person has the right to acquire voting or
investment power within 60 days, by the sum of the number of shares
outstanding as of such date plus the number of shares as to which
such person has the right to acquire voting or investment power
within 60 days. Consequently, the denominator used for calculating
such percentage may be different for each beneficial owner. Except
as otherwise indicated below and under applicable community
property laws, we believe that the beneficial owners of our common
stock listed below have sole voting and investment power with
respect to the shares shown. The business address of the
shareholders is 7401 W. Slaughter Lane #5078, Austin, Texas
78739.
Certain
Ownership Table(1)
|
Name |
|
Number
of
Shares
of
Common
Stock
|
|
|
Percentage |
|
| Thomas Cook (2) |
|
|
1,218 |
|
|
|
0 |
% |
| Leslie Bocskor (3) |
|
|
65,552 |
|
|
|
0.00003504 |
% |
| Rick Gutshall (4) |
|
|
758,401 |
|
|
|
0.00040541 |
% |
| Lang Coleman (5) |
|
|
1,317,528 |
|
|
|
0.0007043 |
% |
| All executive officers and directors
as a group (4 persons) |
|
|
2,141,481 |
|
|
|
0.0001109 |
% |
| |
|
|
|
|
|
|
|
|
| Benjamin Coleman |
|
|
1,317,528 |
|
|
|
0.0007043 |
% |
1.
The percentages are based on the total issued common stock as of
December 31, 2020 of 2,401,396,041.
2.
Mr. Cook is both Chief Executive Officer and Chief Financial
Officer.
3.
Mr. Bocskor is both Incoming Chief Executive Officer and Chief
Financial Officer.
4.
Mr. Gutshall is a Director.
5.
Mr. Coleman is a Director.
This
table is based upon information derived from our stock records.
Unless otherwise indicated in the footnotes to this table and
subject to community property laws where applicable, each of the
shareholders named in this table has sole or shared voting and
investment power with respect to the shares indicated as
beneficially owned.
Item 13. Certain Relationships and
Related Transactions, and Director Independence.
On
January 15, 2018 Ms. Sandra Fowler, was appointed as the Chief
Marketing Officer of the Company. Pursuant to the terms of the
Fowler Employment Agreement, Ms. Fowler shall serve as Chief
Marketing Officer of the Company. The initial term of the agreement
will expire on January 15, 2019 and commencing on January 15, 2019
and on each anniversary of such date thereafter, the term of the
Fowler Employment Agreement shall automatically renew for a
one-year period, unless earlier terminated by either party pursuant
to the terms of the Fowler Employment Agreement. In consideration
for Ms. Fowler’s services, under the Fowler Employment Agreement,
Ms. Fowler shall receive (i) an annual base salary of $48,000 and
(ii) 200,000 shares of restricted common stock of the Company.
Further, pursuant to the Fowler Employment Agreement, the Company
agreed to revise the annual base compensation for Ms. Fowler to
$65,000, after 90 days of the execution of the Fowler Employment
Agreement, or after the Company raises not less than $1,000,000
from sales of its equity securities subsequent to the execution of
the Fowler Employment Agreement, whichever may come first. In
addition, Ms. Fowler shall be eligible to participate in any
equity-based incentive compensation plan or programs adopted by the
Company’s board of directors. On January 15, 2019, this agreement
was terminated.
Weadock
Employment Agreement
On
February 20, 2018, Mr. Daniel Weadock was appointed Chief Executive
Officer and Director of the Company. On February 20, 2018, the
Company entered into an executive employment agreement with Mr.
Weadock (the “Weadock Employment Agreement”), pursuant to which Mr.
Weadock agreed to act as the Company’s chief executive officer.
Pursuant to the terms of the Weadock Employment Agreement, Mr.
Weadock initial will not receive a salary. However, effective on
the business day after the date on which the Company achieves
Capitalization (as hereinafter defined) of $2,000,000 or more, Mr.
Weadock’s annual base salary will be $100,000. For purposes of the
Weadock Employment Agreement, “Capitalization” means aggregate net
cash proceeds received by the Company from (a) the Company’s sale
of common stock pursuant to Puts (as such term is defined in the
Investment Agreement dated as of October 12, 2017 by and between
the Company and Tangiers Global, LLC (the “Investment Agreement”))
under the Investment Agreement, and/or (b) any other sale by the
Company of common stock or preferred stock, whether in a public
offering or a private placement. In addition, pursuant to the terms
of the Weadock Employment Agreement, the Company agreed to grant
Mr. Weadock (i) 300,000 shares of restricted stock as soon as
administratively practicable following execution of the Weadock
Employment Agreement, and (ii) 1,584,202 shares of restricted
common stock, consistent with the grant and vesting schedule set
forth in the agreement; provided, however, that no grant will be
made and no shares will be issued with respect to any grant if Mr.
Weadock is not employed by the Company as an executive on the
respective Date of Grant as set forth in the agreement. The Weadock
Employment Agreement has a term of one year, unless Mr. Weadock’s
employment is terminated sooner by the board of directors, and the
term will be extended for additional one-year periods unless the
Company or Mr. Weadock gives the other party at least 30 days’
prior written notice of its intent not to renew. On February 20,
2018, the Company also entered into a compensation agreement with
Mr. Weadock (the “Director Compensation Agreement”).Pursuant to the
terms of the Director Compensation Agreement, the Company agreed to
grant Mr. Weadock an aggregate of 240,000 shares of restricted
common stock, consistent with the grant and vesting schedule set
forth in the agreement; provided, however, that no grant will be
made and no shares will be issued with respect to any grant, if Mr.
Weadock is not a member of the Company’s board of directors on the
respective Date of Grant as set forth in the agreement. If the
Company is acquired by, or merged into and with, another entity
prior to the last Date of Vesting set forth in the agreement (i.e.
February 23, 2022), all shares issuable to Mr. Weadock under the
Director Compensation Agreement will become fully vested and
non-forfeitable. The Company also agreed to reimburse Mr. Weadock
for all reasonable travel and incidental expenses incurred by Mr.
Weadock in performing his services and attending meetings as
approved in advance by the Company. Also, on February 20, 2018, the
Company also entered into an indemnity agreement with Mr. Weadock
(the “Weadock Indemnity Agreement”). Pursuant to the terms of the
Indemnity Agreement, the Company agreed to use reasonable efforts
to obtain and maintain in full force and effect directors’ and
officers’ liability insurance (“D&O Insurance”) in reasonable
amounts from established and reputable insurers; provided, however,
the Company shall have no obligation to obtain or maintain D&O
Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage provided,
the coverage is reduced by exclusions so as to provide an
insufficient benefit, or Mr. Weadock is covered by similar
insurance maintained by a subsidiary of the Company. In addition
the foregoing, the Company will indemnify Mr. Weadock from certain
third party actions, derivative actions and actions where Mr.
Weadock is decreased; provided, however, the Company shall not be
obligated to indemnify Mr. Weadock for actions including, but not
limited to, actions initiated by Mr. Weadock, for any action in
which it is determined that the material assertions made by Mr.
Weadock in such proceeding were not made in good faith or were
frivolous, for any settlements not authorized by the Company, for
any actions on the account of Mr. Weadock’s willful misconduct, and
for any expenses and the payment of profits arising from the
purchase and sale Mr. Weadock of securities in violation of Section
16(b) of the Securities Exchange Act, or any similar successor
statute; provided, further that, that the Company shall not be
obligated to indemnify Mr. Weadock for expenses or liabilities of
any type whatsoever which have been paid directly to Mr. Weadock
pursuant to the Company’s D&O Insurance policy.
Effective
May 15, 2019, the Registrant mutually and amicably arranged with
departing officer and Director Daniel Weadock, for him to
transition becoming an advisor to the Registrant. Thus, Mr. Weadock
no longer serves in any officer or Director capacity. As part of a
non-material arrangement, subject to the Board monthly requests,
Mr. Weadock focuses include consulting on potential acquisitions,
among other things. The Board confirmed typical consulting
arrangements to apply moving forward, including some shares of
common stock, 100,000, potential future stock and other
considerations, indemnifications, and reimbursement of
expenses.
Management
Effective
May 15, 2019, the Board of Directors appointed Thomas Cook to act
as interim principal accounting officer and principal executive
officer serving in the capacity of interim CEO and interim CFO with
non-material arrangements to apply moving forward, including
compensation of $5,000 and 10,000 shares monthly, potential stock
and other considerations, indemnifications and reimbursement of
expenses. While Mr. Cook was the acting CEO and CFO, the Company
sees him serving in a limited role while it is actively seeking new
CEO and CFO candidates to serve on long term basis, with education
and experiences to fit the Company 2020 plans. As of December 31,
2019, the Company recorded accrued management fee of $9,000. On May
11, 2020, Mr. Cook resigned his positions with the
Company.
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
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 one-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.
Lastly,
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.
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 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.
Director
Independence
Our
board of directors has determined that we do not have a board
member that qualifies as “independent” as the term is used in Item
7(d)(3) (iv)(B) of Schedule 14A under the Securities Exchange Act
of 1934, as amended, and as defined by Rule 4200(a)(15) of the
NASDAQ Marketplace Rules.
Item 14. Principal Accountant Fees and
Services.
WWC,
Professional Corporation, was our independent auditor for the year
ended December 31, 2020.
The
following table shows the fees paid or accrued by us for the audit
and other services provided by our auditor for the fiscal years
ended December 31, 2020 and 2019.
| |
|
2020 |
|
|
2019 |
|
| Audit fees |
|
$ |
17,500
|
|
|
$ |
48,000 |
|
| Audit-related fees |
|
|
- |
|
|
|
— |
|
| Tax fees |
|
|
- |
|
|
|
— |
|
| All other
fees |
|
|
- |
|
|
|
— |
|
| Total |
|
$ |
17,500
|
|
|
$ |
48,000 |
|
As
defined by the SEC, (i) “audit fees” are fees for professional
services rendered by our principal accountant for the audit of our
annual financial statements and review of financial statements
included in our Form 10-K, or for services that are normally
provided by the accountant in connection with statutory and
regulatory filings or engagements for those fiscal years; (ii)
“audit-related fees” are fees for assurance and related services by
our principal accountant that are reasonably related to the
performance of the audit or review of our financial statements and
are not reported under “audit fees;” (iii) “tax fees” are fees for
professional services rendered by our principal accountant for tax
compliance, tax advice, and tax planning; and (iv) “all other fees”
are fees for products and services provided by our principal
accountant, other than the services reported under “audit fees,”
“audit-related fees,” and “tax fees.”
Under
applicable SEC rules, the Audit Committee is required to
pre-approve the audit and non-audit services performed by the
independent auditors in order to ensure that they do not impair the
auditors’ independence. The SEC’s rules specify the types of
non-audit services that an independent auditor may not provide to
its audit client and establish the Audit Committee’s responsibility
for administration of the engagement of the independent auditors.
Until such time as we have an Audit Committee in place, the Board
of Directors will pre-approve the audit and non-audit services
performed by the independent auditors.
Consistent
with the SEC’s rules, the Audit Committee Charter requires that the
Audit Committee review and pre-approve all audit services and
permitted non-audit services provided by the independent auditors
to us or any of our subsidiaries. The Audit Committee may delegate
pre-approval authority to a member of the Audit Committee and if it
does, the decisions of that member must be presented to the full
Audit Committee at its next scheduled meeting.
PART
IV
Item 15. Exhibits and Financial
Statement Schedules.
|
(a) |
1.
Financial Statements |
The
consolidated financial statements and Reports of Independent
Registered Public Accounting Firms are listed in the “Index to
Consolidated Financial Statements” on page F-1 and included on
pages F-2 through F-19.
2.
Financial Statement Schedules
All
schedules for which provision is made in the applicable accounting
regulations of the SEC are either not required under the related
instructions, are not applicable (and therefore have been omitted),
or the required disclosures are contained in the financial
statements included herein.
3.
Exhibits
|
Exhibit |
|
Description |
|
|
|
|
|
2.1 |
|
Agreement
and Plan of Merger and Reorganization. (Incorporated by reference
to exhibit 10.1 in the Registrant’s Form 8- K filed on August 4,
2017). |
|
|
|
|
|
2.2 |
|
Certificate
of Merger. (Incorporated by reference to exhibit 3.1 in the
Registrant’s Form 8-K filed on August 29, 2017). |
|
|
|
|
|
2.3 |
|
Certificate
of Correction. (Incorporated by reference to exhibit 3.1 in the
Registrant’s Form 8-K filed on September 12, 2017). |
|
|
|
|
|
3.1 |
|
Articles
of Incorporation – Indoor Harvest, Corp. (Incorporated by reference
to exhibit 3.1 in the Registrant’s Form S-1 filed on March 5,
2014). |
|
|
|
|
|
3.2 |
|
Bylaws
– Indoor Harvest, Corp. (Incorporated by reference to exhibit 3.2
in the Registrant’s Form S-1 filed on March 5,
2014). |
|
|
|
|
|
3.4 |
|
Amended
Bylaws – Indoor Harvest, Corp. (Incorporated by reference to
exhibit 99.1 in the Registrant’s Form 8-K filed on May 23,
2017). |
|
|
|
|
|
4.1 |
|
Form
of common stock Certificate of Indoor Harvest, Corp. (Incorporated
by reference to exhibit 4.1 in the Registrant’s Form S-1 filed on
March 5, 2014). |
|
|
|
|
|
4.2 |
|
Indoor
Harvest 2015 Stock Award Plan. (Incorporated by reference to Ex.
4.3 in the Registrant’s Registration Statement on Form S-8 filed on
January 21, 2015, as amended). |
|
10.3 |
|
Convertible
Promissory Note with Tangiers Global, LLC. (Incorporated by
reference to exhibit 10.3 in the Registrant’s Form 8-K filed on
October 13, 2017). |
|
|
|
|
|
10.4 |
|
Amendment
Convertible Promissory Note with Tangiers Global, LLC.
(Incorporated by reference to exhibit 10.4 in the Registrant’s Form
8-K filed on October 13, 2017). |
|
|
|
|
|
10.5 |
|
Joint
Venture Agreement between Indoor Harvest, Alamo CBD and Vyripharm.
(Incorporated by reference to exhibit 10.1 in the Registrant’s Form
8-K filed on March 28, 2017). |
|
|
|
|
|
10.6 |
|
Tangiers
8% Fixed Convertible Promissory Note. (Incorporated by reference to
exhibit 10.2 in the Registrant’s Form 8-K filed on March 28,
2017). |
|
|
|
|
|
10.7 |
|
Choo
Director Agreement. (Incorporated by reference to exhibit 10.1 in
Registrant’s Form 8-K filed on March 13, 2015). |
|
|
|
|
|
10.8 |
|
Zimmerman
Director Agreement. (Incorporated by reference to exhibit 10.1 in
Registrant’s Form 8-K filed on April 15, 2015). |
|
|
|
|
|
10.9 |
|
Choo
Employment Agreement. (Incorporated by reference to exhibit 10.1 in
Registrant’s Form 8-K filed on August 14, 2015). |
|
|
|
|
|
10.10 |
|
Rockwell
Securities Purchase Agreement dated March 22, 2016. (Incorporated
by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed
on March 24, 2016). |
|
|
|
|
|
10.11 |
|
Rockwell
Form of Senior Convertible Promissory Note. (Incorporated by
reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on
March 24, 2016). |
|
|
|
|
|
10.12 |
|
FirstFire
Securities Purchase Agreement dated March 22, 2016. (Incorporated
by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed
on March 24, 2016). |
|
|
|
|
|
10.13 |
|
FirstFire
Form of Senior Convertible Promissory Note. (Incorporated by
reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on
March 24, 2016). |
|
|
|
|
|
10.14 |
|
FirstFire
Securities Purchase Agreement dated October 19, 2016. (Incorporated
by reference to exhibit 10.1 in the Registrant’s Form 8-K filed on
October 21, 2016). |
|
|
|
|
|
10.15 |
|
FirstFire
Form of Senior Convertible Promissory Note. (Incorporated by
reference to exhibit 10.2 in the Registrant’s Form 8-K filed on
October 21, 2016). |
|
|
|
|
|
10.16 |
|
Share
Exchange Agreement with Alamo CBD, LLC and the members of Alamo
CBD, LLC. (Incorporated by reference to exhibit 10.1 in the
Registrant’s Form 8-K filed on April 26, 2017). |
|
|
|
|
|
10.17 |
|
Gutshall
Director Agreement dated August 9, 2017. (Incorporated by reference
to exhibit 10.1 in the Registrant’s Form 8- K filed on August 14,
2017). |
|
|
|
|
|
10.18 |
|
Gutshall
Employment Agreement dated August 9, 2017. (Incorporated by
reference to exhibit 10.2 in the Registrant’s Form 8-K filed on
August 14, 2017). |
|
10.19 |
|
Coleman
Director Agreement dated August 9, 2017. (Incorporated by reference
to exhibit 10.5 in the Registrant’s Form 8- K filed on August 14,
2017). |
|
|
|
|
|
10.19 |
|
Tangiers
8% Fixed Convertible Promissory Note. (Incorporated by reference to
exhibit 10.3 in the Registrant’s Form 8-K filed on January 19,
2017). |
|
|
|
|
|
10.20 |
|
Amendment
dated February 13, 2018 to the Convertible Promissory Note issued
to Tangiers on January 16, 2018. (Incorporated by reference to
exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed
with the SEC on February 20, 2018). |
|
|
|
|
|
10.21 |
|
Executive
Employment Agreement dated February 20, 2018 between Indoor Harvest
Corp and Daniel Weadock. (Incorporated by reference to exhibit 10.1
to the Registrant’s Current Report on Form 8-K filed with the SEC
on February 23, 2018). |
|
|
|
|
|
10.22 |
|
Compensation
Agreement dated February 20, 2018 between Indoor Harvest Corp and
Daniel Weadock. (Incorporated by reference to exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed with the SEC on
February 23, 2018). |
|
|
|
|
|
10.23 |
|
Indemnity
Agreement dated February 20, 2018 by and between Indoor Harvest
Corp and Daniel Weadock. (Incorporated by reference to exhibit 10.3
to the Registrant’s Current Report on Form 8-K filed with the SEC
on February 23, 2018). |
|
|
|
|
|
21.1 |
|
Subsidiary
– IHC Consulting, Inc. ( SEC Form 8-K filed on August 14,
2019) |
|
|
|
|
|
31.1* |
|
Certification
of Principal Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
31.2* |
|
Certification
of Principal Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.1* |
|
Certification
of Principal Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
32.2* |
|
Certification
of Principal Financial Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
101.INS* |
|
XBRL
INSTANCE DOCUMENT |
|
|
|
|
|
101.SCH* |
|
XBRL
TAXONOMY EXTENSION SCHEMA |
|
|
|
|
|
101.CAL* |
|
XBRL
TAXONOMY EXTENSION CALCULATION LINKBASE |
|
|
|
|
|
101.DEF* |
|
XBRL
TAXONOMY EXTENSION DEFINITION LINKBASE |
|
|
|
|
|
101.LAB* |
|
XBRL
TAXONOMY EXTENSION LABEL LINKBASE |
|
|
|
|
|
101.PRE* |
|
XBRL
TAXONOMY EXTENSION PRESENTATION LINKBASE |
|
|
|
|
| 104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL
document) |
*Filed
herewith
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) 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.
| Dated:
August 27, 2021 |
INDOOR
HARVEST CORP |
|
|
|
|
| |
By: |
/s/
Leslie Bocskor |
| |
|
Leslie
Bocskor |
| |
|
Chief
Executive Officer |
| |
|
(principal
executive officer, principal financial officer, and principal
accounting officer) |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates
indicated:
|
Signatures |
|
Title |
|
Date |
| |
|
|
|
|
|
/s/
Rick Gutshall |
|
Director |
|
August
27, 2021 |
| Rick
Gutshall |
|
|
|
|
| |
|
|
|
|
|
/s/
Dr. Lang Coleman |
|
Director |
|
August
27, 2021 |
| Dr.
Lang Coleman |
|
|
|
|
INDOOR HARVEST CORP
Consolidated
Financial Statements
December
31, 2020 and 2019
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To: |
The Board of Directors and Stockholders
of |
|
|
Indoor Harvest Corp |
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Indoor Harvest Corp (the “Company”) as of December 31, 2020 and
2019, and the related consolidated statements of income (loss) and
comprehensive loss, changes in shareholders’ equity, and cash flows
for the two-year period ended December 31, 2020, and the related
notes (collectively referred to as the financial statements). In
our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of
December 31, 2020 and 2019, and the results of its operations and
its cash flows for the two-year period ended December 31, 2020, in
conformity with accounting principles generally accepted in the
United States of America.
Emphasis of Matter
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 2 to the financial statements, the Company had incurred
substantial losses during the year ended December 31, 2019 and had
an accumulated deficit and net cash used in operating activities
which raised substantial doubt about its ability to continue as a
going concern. During the year end December 31, 2020, the Company
continued to incur substantial losses and net cash used in
operating activities’ accordingly, the substantial doubt that the
Company will continue as going concern was not alleviated and still
exists. Management’s plans to address this substantial doubt are
set forth in Note 2. These financial statements do not include any
adjustments that might result from the outcome of this
uncertainly.
Basis for Opinion
These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audit, we are required to obtain an
understanding of internal control over financial reporting, but not
for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting.
Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis
for our opinion.
|
/s/
WWC, P.C. |
|
| WWC,
P.C. |
|
| Certified
Public Accountants |
|
We have served as the Company’s auditor since November 26, 2019
San Mateo, California
August 27, 2021
INDOOR
HARVEST CORP
CONSOLIDATED BALANCE
SHEETS
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current
Assets: |
|
|
|
|
|
|
|
|
| Cash |
|
$ |
1,207 |
|
|
$ |
12,353 |
|
|
Prepaid expenses and other receivable |
|
|
1,876 |
|
|
|
5,331 |
|
| Total Current Assets |
|
|
3,083 |
|
|
|
17,684 |
|
| |
|
|
|
|
|
|
|
|
| Furniture and equipment, net |
|
|
- |
|
|
|
4,615 |
|
| Intangible
asset, net |
|
|
- |
|
|
|
2,690 |
|
| TOTAL
ASSETS |
|
$ |
3,083 |
|
|
$ |
24,989 |
|
| |
|
|
|
|
|
|
|
|
| LIABILITIES AND
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
| Current Liabilities: |
|
|
|
|
|
|
|
|
| Accounts payable
and accrued liabilities |
|
$ |
354,596 |
|
|
$ |
399,710 |
|
| Due to related
party |
|
|
- |
|
|
|
100 |
|
| Convertible notes
payable, net of debt discount of $0 and $53,012, respectively |
|
|
123,200 |
|
|
|
897,828 |
|
| Derivative
liabilities |
|
|
44,274,727 |
|
|
|
3,029,748 |
|
| Note
payable |
|
|
- |
|
|
|
3,694 |
|
| Total Current Liabilities |
|
|
44,752,523 |
|
|
|
4,331,080 |
|
| |
|
|
|
|
|
|
|
|
| Total
Liabilities |
|
|
44,752,523 |
|
|
|
4,331,080 |
|
| |
|
|
|
|
|
|
|
|
| Stockholders’ Deficit |
|
|
|
|
|
|
|
|
| Preferred stock:
15,000,000 authorized; $0.01 par value; Series A Convertible
Preferred stock: 15,000,000 designated, 750,000 shares issued and
outstanding as of December 31, 2020 |
|
|
7,500 |
|
|
|
7,500 |
|
| Common stock:
10,000,000,000 authorized; $0.001 par value; 2,401,396,041 and
201,037,304 shares issued and outstanding as of December 31, 2020
and 2019, respectively |
|
|
2,401,396 |
|
|
|
201,038 |
|
| Additional paid in capital |
|
|
14,014,324 |
|
|
|
10,377,256 |
|
| Accumulated
deficit |
|
|
(61,172,660 |
) |
|
|
(14,891,885 |
) |
| Total
Stockholders’ Deficit |
|
|
(44,749,440 |
) |
|
|
(4,306,091 |
) |
| TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
3,083 |
|
|
$ |
24,989 |
|
The
accompanying notes are an integral part of these audited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
| |
|
Years
Ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Revenue |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Operating
Expenses |
|
|
|
|
|
|
|
|
|
Professional fees |
|
|
223,788 |
|
|
|
310,588 |
|
|
General and administrative |
|
|
24,327 |
|
|
|
322,132 |
|
|
Total Operating Expenses |
|
|
248,115 |
|
|
|
632,720 |
|
| |
|
|
|
|
|
|
|
|
| Loss from operations |
|
|
(248,115 |
) |
|
|
(632,720 |
) |
| |
|
|
|
|
|
|
|
|
| Other Income
(Expense) |
|
|
|
|
|
|
|
|
| Interest
expense |
|
|
(523,283 |
) |
|
|
(293,475 |
) |
|
Change in fair value of derivative liability |
|
|
(45,509,377 |
) |
|
|
(2,170,626 |
) |
| Total
other loss |
|
|
(46,032,660 |
) |
|
|
(2,464,101 |
) |
| |
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(46,280,775 |
) |
|
|
(3,096,821 |
) |
| |
|
|
|
|
|
|
|
|
| Provision for
income taxes |
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
| Net
loss |
|
$ |
(46,280,775 |
) |
|
$ |
(3,096,821 |
) |
| |
|
|
|
|
|
|
|
|
| Basic and
diluted loss per common share |
|
$ |
(0.17 |
) |
|
$ |
(0.05 |
) |
| |
|
|
|
|
|
|
|
|
| Weighted average number of common
shares outstanding |
|
|
267,167,835 |
|
|
|
64,323,610 |
|
The
accompanying notes are an integral part of these audited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS’ DEFICIT
| |
|
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 |
|
|
- |
|
|
|
- |
|
|
|
6,245,318 |
|
|
|
6,246 |
|
|
|
94,220 |
|
|
|
- |
|
|
|
100,466 |
|
| Common stock
issued for services - related party |
|
|
- |
|
|
|
- |
|
|
|
319,012 |
|
|
|
319 |
|
|
|
10,768 |
|
|
|
- |
|
|
|
11,087 |
|
| Convertible debt
converted into common stock |
|
|
- |
|
|
|
- |
|
|
|
159,584,559 |
|
|
|
159,585 |
|
|
|
214,646 |
|
|
|
- |
|
|
|
374,231 |
|
| Derivative
liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
757,634 |
|
|
|
- |
|
|
|
757,634 |
|
| Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,096,821 |
) |
|
|
(3,096,821 |
) |
| 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 |
|
|
- |
|
|
|
- |
|
|
|
2,198,337,731 |
|
|
|
2,198,337 |
|
|
|
(786,231 |
) |
|
|
- |
|
|
|
1,412,106 |
|
| Derivative
liability |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
4,352,300 |
|
|
|
- |
|
|
|
4,352,300 |
|
| Write off due to
related party |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
100 |
|
|
|
- |
|
|
|
100 |
|
| Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(46,280,775 |
) |
|
|
(46,280,775 |
) |
|
Balance - December 31, 2020 |
|
|
750,000 |
|
|
$ |
7,500 |
|
|
|
2,401,396,041 |
|
|
$ |
2,401,396 |
|
|
$ |
14,014,324 |
|
|
$ |
(61,172,660 |
) |
|
$ |
(44,749,440 |
) |
The
accompanying notes are an integral part of these audited
consolidated financial statements.
INDOOR
HARVEST CORP
CONSOLIDATED STATEMENTS OF CASH
FLOWS
| |
|
Years
Ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
| Net
loss |
|
$ |
(46,280,775 |
) |
|
$ |
(3,096,821 |
) |
| Adjustments to
reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and
amortization expense |
|
|
7,305 |
|
|
|
11,147 |
|
| Amortization of
debt discount |
|
|
140,913 |
|
|
|
157,631 |
|
| Change in fair
value of embedded derivative liability |
|
|
45,509,377 |
|
|
|
2,170,626 |
|
| Stock issued for
services - third party |
|
|
72,920 |
|
|
|
100,466 |
|
| Stock issued for
services - related party |
|
|
- |
|
|
|
11,087 |
|
| Changes in
operating assets and liabilities: |
|
|
|
|
|
|
|
|
| Prepaid expenses
and other receivable |
|
|
3,455 |
|
|
|
13,039 |
|
| Security
deposit |
|
|
- |
|
|
|
12,600 |
|
| Accounts payable
and accrued expenses |
|
|
529,353 |
|
|
|
184,171 |
|
| Deferred rent |
|
|
- |
|
|
|
(1,826 |
) |
|
Accrued compensation - officers |
|
|
- |
|
|
|
(3,722 |
) |
| Net
Cash used in Operating Activities |
|
|
(17,452 |
) |
|
|
(441,602 |
) |
| |
|
|
|
|
|
|
|
|
| Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
| Repayments of note
payable |
|
|
(3,694 |
) |
|
|
(9,131 |
) |
| Proceeds from
convertible notes, less OID costs paid |
|
|
10,000 |
|
|
|
307,304 |
|
|
Proceeds from related party |
|
|
- |
|
|
|
100 |
|
| Net
Cash provided by Financing Activities |
|
|
6,306 |
|
|
|
298,273 |
|
| |
|
|
|
|
|
|
|
|
| Net change in cash |
|
|
(11,146 |
) |
|
|
(143,329 |
) |
| Cash, beginning of period |
|
|
12,353 |
|
|
|
155,682 |
|
| Cash, end of period |
|
$ |
1,207 |
|
|
$ |
12,353 |
|
| |
|
|
|
|
|
|
|
|
| Supplemental Cash
Flow Information |
|
|
|
|
|
|
|
|
| Cash
paid for interest |
|
$ |
- |
|
|
$ |
779 |
|
| Cash
paid for taxes |
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
| Non-Cash Investing
and Financing Activities: |
|
|
|
|
|
|
|
|
|
Derivative liability recognized as debt discount |
|
$ |
87,901 |
|
|
$ |
162,000 |
|
|
Conversion of convertible note into common shares |
|
$ |
1,412,106 |
|
|
$ |
374,231 |
|
|
Derivative liability reclassified to paid-in capital |
|
$ |
4,352,300 |
|
|
$ |
757,634 |
|
| Write
off due to related party |
|
$ |
100 |
|
|
$ |
- |
|
The
accompanying notes are an integral part of these audited
consolidated financial statements.
INDOOR
HARVEST CORP
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
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 was 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 provided full service,
state of the art design-build, engineering, procurement and
construction services to the indoor and vertical farming industry.
The Company provided 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 actively selling 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 will provide consulting
and other services to the Company and others on a contracted
basis.
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 December 31, 2019. 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.
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 Indoor
Harvest Corp. and its wholly-owned subsidiaries, Alamo CBD and IHC.
All significant inter-company accounts and transactions have been
eliminated in consolidation.
Cash
and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of
three months or less to be cash and cash equivalents.
Stock
Based Compensation
The
Company recognizes stock-based compensation in accordance with ASC
718, Stock Compensation. ASC 718 focuses on transactions in which
an entity exchanges its equity instruments for goods or services,
with a primary focus in which an entity obtains employee services
in stock-based payment transactions. ASC 718 requires measurement
of the cost of employee services received in exchange for an award
of equity instruments based on the grant date fair value of the
award (with limited exceptions).
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 years ended December 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.
| |
|
Years
ended |
|
| |
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| |
|
(shares) |
|
|
(shares) |
|
| |
|
|
|
|
|
|
| Series A Preferred
Stock |
|
|
12,500,000,000 |
|
|
|
1,214,574,899 |
|
| Convertible
notes |
|
|
149,922,109 |
|
|
|
1,197,242,200 |
|
| |
|
|
12,649,922,109 |
|
|
|
2,411,817,099 |
|
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
December 31, 2020 and 2019, measured at fair value on a recurring
basis:
|
December 31, 2020 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| None |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
44,274,727 |
|
|
$ |
44,274,727 |
|
|
December 31,2019 |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| None |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Derivative liabilities |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,029,748 |
|
|
$ |
3,029,748 |
|
Income
Taxes
The
Company accounts for income taxes pursuant to ASC 740—Income Taxes,
which requires recognition of deferred income tax liabilities and
assets for the expected future tax consequences of events that have
been recognized in the financial statements or tax returns. The
Company provides for deferred taxes on temporary differences
between the financial statements and tax basis of assets using the
enacted tax rates that are expected to apply to taxable income when
the temporary differences are expected to reverse.
ASC
740 establishes a more-likely-than-not threshold for recognizing
the benefits of tax return positions in the financial statements.
Also, the statement implements a process for measuring those tax
positions that meet the recognition threshold of being ultimately
sustained upon examination by the taxing authorities. There are no
uncertain tax positions taken by the Company on its tax returns.
The Company files tax returns in the U.S. and states in which it
has operations and is subject to taxation. Tax years subsequent to
2011 remain open to examination by U.S. federal and state tax
jurisdictions.
On
December 22, 2017, the U.S. government enacted comprehensive tax
legislation commonly referred to as the Tax Cuts and Jobs Act (the
“Tax Reform Act”). We recognize the impact of tax legislation in
the period in which the law is enacted. In December 2017, the SEC
staff issued Staff Accounting Bulletin No. 118, which addresses how
a company recognizes provisional amounts when a company does not
have the necessary information available, prepared or analyzed
(including computations) in reasonable detail to complete its
accounting for the effect of the changes in the Tax Reform Act.
Consistent with that guidance, we recognized provisional amounts
based upon our interpretation of the tax laws and estimates which
require significant judgments. The actual impact of these tax laws
may differ from these provisional amounts, possibly materially, due
to, among other things, additional analysis, changes in our
interpretations and assumptions, additional guidance that may be
issued by the government and actions we may take as a result of
these enacted tax laws. Any adjustments recorded to the provisional
amounts will be included in income from operations as an adjustment
to tax expense.
Property
and Equipment
Property
and equipment are recorded at cost and depreciated or amortized
using the straight-line method over the estimated useful life of
the asset or the underlying lease term for leasehold improvements,
whichever is shorter. The estimated useful life by asset
description is noted in the following table:
| |
|
Estimated
Useful |
|
Asset Description |
|
Life (Years) |
| Furniture and equipment |
|
3-5 |
| Tooling equipment |
|
10 |
| Leasehold improvements |
|
* |
* The
shorter of 5 years or the life of the lease.
Additions
are capitalized and maintenance and repairs are charged to expense
as incurred. Gains and losses on dispositions of equipment are
reflected in other income.
Intangible
Assets
In
accordance with ASC 350 Goodwill and Other Intangible Assets,
indefinite-lived intangible assets are not amortized but are
evaluated for impairment annually or more often if indicators of a
potential impairment are present. Indefinite-lived intangible
assets consist of the Company’s domain name. Finite-lived
intangible assets include software and is amortized over a 3 to
5-year period. The Company recognized $0 for impairment charges
taken during the years ended December 31, 2020 and 2019,
respectively.
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 December 31, 2020 and 2019, the Company
did not have any derivative instruments that were designated as
hedges.
Beneficial
Conversion Feature
For
conventional convertible debt where the rate of conversion is below
market value, the Company records a “beneficial conversion feature”
(“BCF”) and related debt discount.
When
the Company records a BCF, the relative fair value of the BCF is
recorded as a debt discount against the face amount of the
respective debt instrument. The discount is amortized to interest
expense over the life of the debt.
Reclassification
Certain
amounts from prior periods have been reclassified to conform to the
current period presentation.
Adoption
of New Accounting Standards
Effective
January 1, 2019, we adopted Accounting Standards Codification 842,
Leases (“ASC 842”). Operating lease right-of-use (“ROU”) assets
represent our right to use an underlying asset for the lease term
and lease liabilities represent our obligation to make lease
payments arising from the lease, both of which are recognized based
on the present value of the future minimum lease payments over the
lease term at the commencement date. Leases with a lease term of 12
months or less at inception are not recorded on our consolidated
balance sheet and are expensed on a straight-line basis over the
lease term in our consolidated statement of income. The adoption of
this standard did not have a significant impact on the financial
statements.
NOTE 2 - GOING CONCERN
As
reflected in the accompanying financial statements, the Company had
a net loss of $46,280,775, net cash used in operations of $17,452
and has an accumulated deficit of $61,172,660, for the year ended
December 31, 2020. These factors raise substantial doubt about the
Company’s ability to continue as a going concern.
The
ability of the Company to continue as a going concern is dependent
on Management’s plans which include potential asset acquisitions,
mergers or business combinations with other entities, further
implementation of its business plan and continuing to raise funds
through debt or equity financings. The Company will likely rely
upon related party debt or equity financing in order to ensure the
continuing existence of the business.
The
business plan of the Company is to engage in the design,
development, marketing and direct-selling of commercial grade
aeroponics fixtures and supporting systems for use in urban
Controlled Environment Agriculture (“CEA”) and Building Integrated
Agriculture (“BIA”). During the next twelve months, the Company’s
strategy is to: complete ongoing product development; commence
product marketing, product assembly and sales; construct a
demonstration CEA and BIA farm; and offer design-build services.
The Company’s long-term strategy is to direct sale, license and
franchise their patented technologies and methods.
The
accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. These
financial statements do not include any adjustments relating to the
recovery of the recorded assets or the classification of the
liabilities that might be necessary should the Company be unable to
continue as a going concern.
NOTE 3 - PROPERTY AND EQUIPMENT
Property
and equipment consist of the following at December 31, 2020 and
2019:
| |
|
December 31, |
|
|
December 31, |
|
|
Classification |
|
2020 |
|
|
2019 |
|
| Furniture and
equipment |
|
$ |
11,666 |
|
|
$ |
11,666 |
|
| Leasehold improvements |
|
|
38,717 |
|
|
|
38,717 |
|
| Computer
equipment |
|
|
3,019 |
|
|
|
3,019 |
|
| Total |
|
|
53,402 |
|
|
|
53,402 |
|
| Less:
Accumulated depreciation |
|
|
(53,402 |
) |
|
|
(48,787 |
) |
| Property and
equipment, net |
|
$ |
- |
|
|
$ |
4,615 |
|
Depreciation
expense for the years ended December 31, 2020 and 2019, totaled $0
and $4,615, respectively.
NOTE 4 - INTANGIBLE ASSETS
There
were no impairment charges taken for intangible assets during the
years ended December 31, 2020 and 2019.
Intangible
assets consist of the following at December 31, 2020 and
2019:
| |
|
December 31, |
|
|
December 31, |
|
|
Classification |
|
2020 |
|
|
2019 |
|
| Domain name |
|
$ |
2,000 |
|
|
$ |
2,000 |
|
| Facilities Manager’s Package
Online |
|
|
1,022 |
|
|
|
1,022 |
|
| MLC CD Systems
(software) |
|
|
7,560 |
|
|
|
7,560 |
|
| Total |
|
|
10,582 |
|
|
|
10,582 |
|
| Less:
Accumulated amortization |
|
|
(10,582 |
) |
|
|
(7,892 |
) |
| Intangible
assets, net |
|
$ |
- |
|
|
$ |
2,690 |
|
Amortization
expense for the years ended December 31, 2020 and 2019, totaled $0
and $2,690, respectively.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES
Accounts
payable and accrued liabilities at December 31, 2020 and 2019 are
as follows:
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Accounts payable |
|
$ |
283,357 |
|
|
$ |
130,584 |
|
| Credit card |
|
|
16,570 |
|
|
|
16,595 |
|
| Accrued expenses |
|
|
15,714 |
|
|
|
15,714 |
|
| Accrued management fee |
|
|
3,605 |
|
|
|
9,000 |
|
| Accrued
interest |
|
|
35,350 |
|
|
|
227,817 |
|
| |
|
$ |
354,596 |
|
|
$ |
399,710 |
|
NOTE 6 - CONVERTIBLE NOTES PAYABLE
Convertible
notes payable at December 31, 2020 and December 31, 2019 are as
follows:
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2020 |
|
|
2019 |
|
| Note 2 |
|
$ |
50,000 |
|
|
$ |
50,000 |
|
| Note 3 |
|
|
- |
|
|
|
226,956 |
|
| Note 4 |
|
|
- |
|
|
|
522,884 |
|
| Note 5 |
|
|
- |
|
|
|
65,000 |
|
| Note 6 |
|
|
25,200 |
|
|
|
48,000 |
|
| Note 7 |
|
|
38,000 |
|
|
|
38,000 |
|
| Noe 8 - related
party |
|
|
10,000 |
|
|
|
- |
|
| Total convertible notes payable |
|
|
123,200 |
|
|
|
950,840 |
|
| |
|
|
|
|
|
|
|
|
| Less:
Unamortized debt discount |
|
|
- |
|
|
|
(53,012 |
) |
| Total convertible notes |
|
|
123,200 |
|
|
|
897,828 |
|
| |
|
|
|
|
|
|
|
|
| Less: current
portion of convertible notes |
|
|
123,200 |
|
|
|
897,828 |
|
| Long-term
convertible notes |
|
$ |
- |
|
|
$ |
- |
|
During the years ended December 31, 2020 and 2019, the Company
recorded total interest expense of $523,283 and $293,475, of which
included amortization of discount of $140,913 and $157,631. As of
December 31, 2020 and 2019, the Company had accrued interest of
$35,350 and $374,231, respectively.
Conversion
During
the year ended December 31, 2020, the Company converted notes with
principal amounts and accrued interest of $1,412,106 into
2,198,337,731 shares of common stock. The corresponding derivative
liability at the date of conversion of $4,352,300 was settled
through additional paid in capital.
During
the year ended December 31, 2019, the Company converted notes with
principal amounts and accrued interest of $374,231 into 159,584,559
shares of common stock. The corresponding derivative liability at
the date of conversion of $757,634 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
8 – related party
On
September 28, 2020, the Company issued and sold an 10% Fixed
Convertible Promissory Note (“Note 8”) to a related party, in the
principal amount of $10,000. Note 8 is convertible into shares of
the Company’s common stock ninety (90) days from September 28,
2020. Note 8 is convertible at a conversion price of 65% of the
lowest trading prices of the Company’s common stock during the
fifteen (15) consecutive trading days prior to the date of on which
a noteholder elects to convert all or part of the Note
8.
NOTE 7 - DERIVATIVE LIABILITIES
The
Company identified the conversion features embedded within its
convertible debts as financial derivatives. The Company bifurcated
a conversion liability related to a down-round protection provided
to the Series A Preferred Stock. The Company has determined that
the embedded conversion option should be accounted for at fair
value.
At
December 31, 2020, the estimated fair values of the liabilities
measured on a recurring basis are as follows:
| |
|
|
Year
ended |
|
|
|
Year
ended |
|
| |
|
|
December
31, 2020 |
|
|
|
December
31, 2019 |
|
| Expected term |
|
|
0.06
- 0.50 |
|
|
|
0.01
- 1.00 |
|
| Expected average volatility |
|
|
146%
- 389 |
% |
|
|
186%
- 287 |
% |
| Expected dividend yield |
|
|
- |
|
|
|
- |
|
| Risk-free interest rate |
|
|
0.07%
- 0.27 |
% |
|
|
1.60%
- 2.45 |
% |
The
following schedule shows the change in fair value of the derivative
liabilities at December 31, 2020:
| Fair Value
Measurements Using Significant Observable Inputs (Level 3) |
|
Balance - December 31, 2018 |
|
$ |
1,452,469 |
|
| Addition of new derivatives recognized
as debt discounts |
|
|
164,287 |
|
| Addition of new derivatives recognized
as loss on derivatives |
|
|
972,264 |
|
| Settled on issuance of common
stock |
|
|
(757,634 |
) |
| Gain on change
in fair value of the derivative |
|
|
1,198,362 |
|
| Balance - December 31, 2019 |
|
$ |
3,029,748 |
|
| Addition of new derivatives recognized
as debt discounts |
|
|
87,901 |
|
| Addition of new derivatives recognized
as loss on derivatives |
|
|
700,508 |
|
| Settled on issuance of common
stock |
|
|
(4,352,299 |
) |
| Loss on change
in fair value of the derivative |
|
|
44,808,869 |
|
| Balance -
December 31, 2020 |
|
$ |
44,274,727 |
|
The
aggregate loss on derivatives during the years ended December 31,
2020 and 2019 was $45,509,377 and $2,170,626,
respectively.
If
the Company shall at any time after the date of issuance of the
Series A Convertible Preferred Stock issue any additional shares of
common stock except exempted securities, without cash consideration
or for a cash consideration per share less than the Series A
Conversion Price in effect immediately prior to such issue, then
the Series A Conversion Price shall be adjusted by being reduced,
concurrently with such issue, to a price equal to the sale price of
the additional shares of common stock. If the Company issues
securities convertible into shares of common stock rather than
common stock, the adjustment shall be based upon the conversion
price of the convertible securities so issued. The conversion price
of the Series A Convertible Preferred Stock as of December 31, 2020
is $0.00006. If the Series A Convertible Preferred Stock is fully
converted, the common stock shares will be 12,500,000,000. The
market price on December 31, 2020, which is $0.0035 was used in
lieu of pricing model because the contract did not have an end
date.
NOTE 8 - RELATED PARTY TRANSACTIONS
On
January 15, 2018 Ms. Sandra Fowler, was appointed as the Chief
Marketing Officer of the Company. Pursuant to the terms of the
Fowler Employment Agreement, Ms. Fowler shall serve as Chief
Marketing Officer of the Company. The initial term of the agreement
will expire on January 15, 2019 and commencing on January 15, 2019
and on each anniversary of such date thereafter, the term of the
Fowler Employment Agreement shall automatically renew for a
one-year period, unless earlier terminated by either party pursuant
to the terms of the Fowler Employment Agreement. In consideration
for Ms. Fowler’s services, under the Fowler Employment Agreement,
Ms. Fowler shall receive (i) an annual base salary of $48,000 and
(ii) 200,000 shares of restricted common stock of the Company.
Further, pursuant to the Fowler Employment Agreement, the Company
agreed to revise the annual base compensation for Ms. Fowler to
$65,000, after 90 days of the execution of the Fowler Employment
Agreement, or after the Company raises not less than $1,000,000
from sales of its equity securities subsequent to the execution of
the Fowler Employment Agreement, whichever may come first. In
addition, Ms. Fowler shall be eligible to participate in any
equity-based incentive compensation plan or programs adopted by the
Company’s board of directors. On January 15, 2019, this agreement
was terminated.
Weadock
Employment Agreement
On
February 20, 2018, Mr. Daniel Weadock was appointed Chief Executive
Officer and Director of the Company. On February 20, 2018, the
Company entered into an executive employment agreement with Mr.
Weadock (the “Weadock Employment Agreement”), pursuant to which Mr.
Weadock agreed to act as the Company’s chief executive officer.
Pursuant to the terms of the Weadock Employment Agreement, Mr.
Weadock initial will not receive a salary. However, effective on
the business day after the date on which the Company achieves
Capitalization (as hereinafter defined) of $2,000,000 or more, Mr.
Weadock’s annual base salary will be $100,000. For purposes of the
Weadock Employment Agreement, “Capitalization” means aggregate net
cash proceeds received by the Company from (a) the Company’s sale
of common stock pursuant to Puts (as such term is defined in the
Investment Agreement dated as of October 12, 2017 by and between
the Company and Tangiers Global, LLC (the “Investment Agreement”))
under the Investment Agreement, and/or (b) any other sale by the
Company of common stock or preferred stock, whether in a public
offering or a private placement. In addition, pursuant to the terms
of the Weadock Employment Agreement, the Company agreed to grant
Mr. Weadock (i) 300,000 shares of restricted stock as soon as
administratively practicable following execution of the Weadock
Employment Agreement, and (ii) 1,584,202 shares of restricted
common stock, consistent with the grant and vesting schedule set
forth in the agreement; provided, however, that no grant will be
made and no shares will be issued with respect to any grant if Mr.
Weadock is not employed by the Company as an executive on the
respective Date of Grant as set forth in the agreement. The Weadock
Employment Agreement has a term of one year, unless Mr. Weadock’s
employment is terminated sooner by the board of directors, and the
term will be extended for additional one-year periods unless the
Company or Mr. Weadock gives the other party at least 30 days’
prior written notice of its intent not to renew. On February 20,
2018, the Company also entered into a compensation agreement with
Mr. Weadock (the “Director Compensation Agreement”).Pursuant to the
terms of the Director Compensation Agreement, the Company agreed to
grant Mr. Weadock an aggregate of 240,000 shares of restricted
common stock, consistent with the grant and vesting schedule set
forth in the agreement; provided, however, that no grant will be
made and no shares will be issued with respect to any grant, if Mr.
Weadock is not a member of the Company’s board of directors on the
respective Date of Grant as set forth in the agreement. If the
Company is acquired by, or merged into and with, another entity
prior to the last Date of Vesting set forth in the agreement (i.e.
February 23, 2022), all shares issuable to Mr. Weadock under the
Director Compensation Agreement will become fully vested and
non-forfeitable. The Company also agreed to reimburse Mr. Weadock
for all reasonable travel and incidental expenses incurred by Mr.
Weadock in performing his services and attending meetings as
approved in advance by the Company. Also, on February 20, 2018, the
Company also entered into an indemnity agreement with Mr. Weadock
(the “Weadock Indemnity Agreement”). Pursuant to the terms of the
Indemnity Agreement, the Company agreed to use reasonable efforts
to obtain and maintain in full force and effect directors’ and
officers’ liability insurance (“D&O Insurance”) in reasonable
amounts from established and reputable insurers; provided, however,
the Company shall have no obligation to obtain or maintain D&O
Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount of coverage provided,
the coverage is reduced by exclusions so as to provide an
insufficient benefit, or Mr. Weadock is covered by similar
insurance maintained by a subsidiary of the Company. In addition
the foregoing, the Company will indemnify Mr. Weadock from certain
third party actions, derivative actions and actions where Mr.
Weadock is decreased; provided, however, the Company shall not be
obligated to indemnify Mr. Weadock for actions including, but not
limited to, actions initiated by Mr. Weadock, for any action in
which it is determined that the material assertions made by Mr.
Weadock in such proceeding were not made in good faith or were
frivolous, for any settlements not authorized by the Company, for
any actions on the account of Mr. Weadock’s willful misconduct, and
for any expenses and the payment of profits arising from the
purchase and sale Mr. Weadock of securities in violation of Section
16(b) of the Securities Exchange Act, or any similar successor
statute; provided, further that, that the Company shall not be
obligated to indemnify Mr. Weadock for expenses or liabilities of
any type whatsoever which have been paid directly to Mr. Weadock
pursuant to the Company’s D&O Insurance policy.
Effective
May 15, 2019, the Registrant mutually and amicably arranged with
departing officer and Director Daniel Weadock, for him to
transition to becoming an advisor to the Registrant. Thus, Mr.
Weadock no longer serves in any officer or Director capacity. As
part of a non-material arrangement, subject to the Board monthly
requests, Mr. Weadock focuses include consulting on potential
acquisitions, among other things. The Board confirmed typical
consulting arrangements to apply moving forward, including some
shares of common stock, 100,000, potential future stock and other
considerations, indemnifications and reimbursement of
expenses.
Management
Effective
May 11, 2020, the Company 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.
Debt
forgiveness
During
the year ended December 31, 2020, the Company wrote off $100 due to
related party and recognized it as additional
paid-in-capital.
NOTE 9 - 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. |
The
Company financials have been presented assuming that the increase
in authorized was in effect from the first period
presented.
Preferred Stock
Series
A Convertible Preferred Stock
The
Company has designated 15,000,000 shares of Series A Preferred
Stock with a par value of $0.01.
The
stated value of each issued share of Series A Convertible Preferred
Stock shall be deemed to be $1.00, as the same may be equitably
adjusted whenever there may occur a stock dividend, stock split,
combination, reclassification or similar event affecting the Series
A Convertible Preferred Stock. There are no dividends payable on
the Series A Convertible Preferred Stock. Each holder of
outstanding shares of Series A Convertible Preferred Stock shall be
entitled to cast the number of votes for the Series A Convertible
Preferred Stock in an amount equal to the number of whole shares of
common stock into which the shares of Series A Convertible
Preferred Stock held by such holder are convertible as of the
record date for determining stockholders entitled to vote on such
matter
The
Series A Preferred Stock also had a “down-round” protection feature
provided to the investors if the Company subsequently issued or
sold any shares of common stock, stock options, or convertible
securities at a price less than the conversion price of $1.00 per
common share. The conversion price would be automatically
adjustable down to the price of the instrument being issued. As a
result of conversion during the year ended December 31, 2020, the
Series A Preferred Stock conversion price was reset to $0.00006 per
share.
Upon
any liquidation, dissolution or winding-up of the Company under
Texas law, whether voluntary or involuntary, the holders of the
shares of Series A Convertible Preferred Stock shall be paid an
amount equal to the aggregate stated value of their shares of
Series A Convertible Preferred Stock, before any payment shall be
paid to the holders of common stock, or any other stock ranking on
liquidation junior to the Series A Convertible Preferred Stock, an
amount for each share of Series A Convertible Preferred Stock held
by such holder equal to the sum of the Stated Value
thereof.
As at
December 31, 2020 and 2019, there were 750,000 shares of Series A
Convertible Preferred Stock issued and outstanding.
On
August 27, 2021, Indoor Harvest Corp (the “Company”) completed an
initiative when it entered into a Modification Agreement (the
“Modification”) in cooperation with the current Series A Preferred
shareholders to modify their conversion privileges to align and
support current management team initiatives and shareholder
interests. The modification agreement provides the Preferred
shareholders the ability to convert into common shares at a
conversion price at the lower of $0.40 (per the original
agreement), or the subsequent per share pricing of a future equity
raise greater than Five Hundred Thousand ($500,000) Dollars. This
Modification is forecasted to support anti- dilutive measures
potentially to the benefit of our shareholders and may allow the
Company to proceed with plans relating to funding needs.
Common Stock
Each
common stock entitles the holder to one vote, in person or proxy,
on any matter on which action of the stockholders of the
corporation is sought.
During
the year ended December 31, 2020, the Company issued 2,200,358,737
shares of common stock as follows:
|
|
● |
2,021,006
shares to consultant valued at $72,920 for consulting
services |
| |
● |
2,198,337,731
shares for conversion of debt of $1,412,106 |
During
the year ended December 31, 2019, the Company issued 166,148,889
shares of common stock as follows:
| |
● |
6,245,318
shares valued at $100,466 for consulting services |
| |
● |
129,012
shares valued at $6,179 pursuance to Weadock Employment Agreement
(Note 8) |
| |
● |
100,000
shares valued at $3,690 for a termination of Weadock Employment
Agreement (Note 8) |
| |
● |
90,000
shares valued at $1,218 for a management compensation (Note
8) |
| |
● |
159,584,559
shares resulting from the conversion of debt valued at $367,128
(Note 6) |
NOTE 10 - INCOME TAXES
Indoor
Harvest operates in the United States; accordingly, federal and
state income taxes have been provided based upon the tax laws and
rates of the US. Deferred taxes are determined based on the
temporary differences between the financial statement and income
tax bases of assets and liabilities as measured by the enacted tax
rates, which will be in effect when these differences
reverse.
The
components of deferred income tax assets and liabilities as of
December 31, 2020 and 2019 are as follows:
|
Description |
|
2020 |
|
|
2019 |
|
| |
|
|
|
|
|
|
| Deferred tax
assets |
|
|
|
|
|
|
|
|
| Net operating losses |
|
$ |
1,681,907 |
|
|
$ |
1,549,505 |
|
| Deferred tax
liabilities |
|
|
|
|
|
|
|
|
| Accelerated tax
depreciation |
|
|
- |
|
|
|
19,183 |
|
| Net deferred tax assets |
|
|
1,681,907 |
|
|
|
1,568,688 |
|
| |
|
|
|
|
|
|
|
|
| Less: Valuation
allowance |
|
|
(1,681,907 |
) |
|
|
(1,568,688 |
) |
| Net |
|
$ |
- |
|
|
$ |
- |
|
At
December 31, 2020 and 2019, the Company has provided a full
valuation allowance for the deferred tax assets. The Company’s
accumulated net operating loss as of December 31, 2020 of
$5,856,768, if not used, will begin to expire in 2033.
The
Company experienced a change in control for tax purposes in 2017 as
a result of the merger with Alamo CBD. Accordingly, the future
utilization of net operating losses will be severely restricted by
Section 382 of the Internal Revenue Code. Management is in the
process of assessing this impact.
NOTE 11 - COMMITMENTS & CONTINGENCIES
As of
December 31, 2020, the Company did not have any outstanding rental
commitments; the Company incurred rent expense for the years ended
December 31, 2020 and 2019, totaling $0 and $17,050,
respectively.
NOTE 12 - SUBSEQUENT EVENTS
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 26, 2021, Indoor Harvest Corp (the “Company”) entered
into subscription agreements, (the “Agreement”), with certain
accredited investors for the sale of Eighty-Two Million
(82,000,000) Common Shares (the “Shares”) of the Company’s common
stock, par value of $0.001 per share, for a total consideration to
the Company of Four Hundred and Ten Thousand ($410,000) Dollars.
The Shares will be restricted and subject to
compliant required holding periods under Rule 144.
The Company intends to use the net proceeds from the sale of the
Shares for general corporate purposes, such as payments for certain
vendor services, filing requirements, settlement of certain
payables, working capital, etc.
On August 27, 2021, Indoor Harvest Corp (the “Company”) completed
an initiative when it entered into a Modification Agreement (the
“Modification”) in cooperation with the current Series A Preferred
shareholders to modify their conversion privileges to align and
support current management team initiatives and shareholder
interests. The modification agreement provides the Preferred
shareholders the ability to convert into common shares at a
conversion price at the lower of $0.40 (per the original
agreement), or the subsequent per share pricing of a future equity
raise greater than Five Hundred Thousand ($500,000) Dollars. This
Modification is forecasted to support anti- dilutive measures
potentially to the benefit of our shareholders and may allow the
Company to proceed with plans relating to funding needs.
The company is subject to
risks, statements herein include forecasts, actual events may be
different, nothing herein is an offer or solicitation of an offer
for the sale or purchase of any security.
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