INQD

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

or

INDOOR HARVEST CORP

(Exact name of registrant as specified in its charter)

512-309-1776

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

☐ YES ☒ NO

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 2,689,190,084 common shares issued and outstanding as of September 30, 2022.

TABLE OF CONTENTS

FORWARD-LOOKING STATEMENTS

Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue” or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:

Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.

When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.

PART I - FINANCIAL INFORMATION

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

For the Nine months Ended September 30, 2022

For the Nine months Ended September 30, 2021

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

INDOOR HARVEST CORP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2022

(UNAUDITED)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Organization

Indoor Harvest Corp (the “Company” or “Indoor Harvest”) is a Texas corporation formed on November 23, 2011. Our principal executive office was located at 7401 W. Slaughter Lane #5078, Austin, Texas 78739, and such address is used in the interim. We are in the process of establishing new offices.

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.

The Company incorporates development of proprietary technology, mergers, acquisitions, strategic partnerships, and joint ventures as part of a broad integration strategy. As a platform, Indoor Harvest Corp. cultivates synergistic partnerships within related industries, providing an opportunity to be part of a more significant play, sharing intellectual capital, technology, access to new capital markets, and liquidity for owners.

Basis of Presentation

The accompanying unaudited condensed consolidated 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”) and the requirements of Form 10-Q and Rule 8-03 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, they may not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2021, as not all disclosures required by generally accepted accounting principles for annual financial statements may be presented.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates include, but are not limited to, the estimate of percentage of completion on construction contracts in progress at each reporting period which we rely on as a primary basis of revenue recognition, estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for services, equipment and the liquidation of liabilities.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant inter-company accounts and transactions have been eliminated in consolidation.

Earnings (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 cancelled 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.

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 September 30, 2022 and December 31, 2021, the Company did not have any derivative instruments that were designated as hedges.

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).

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options” and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company has adopted the ASU as of January 1, 2022, there were no material impacts to the financial statements.

Reclassification

Certain accounts from prior periods have been reclassified to conform to the current period presentation.

NOTE 2 - GOING CONCERN

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company had minimal cash as of September 30, 2022, incurred losses from its operations and did not generate cash from its operation for the past two years and nine months ended September 30, 2022. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s products and business.

NOTE 3 – NOTES RECEIVABLE

During the three months ended September 30, 2022, the Company granted loans of $100,000 and were issued by debtors the following three secured promissory notes that the Company intends to hold to maturity:

SCHEDULE OF SECURED PROMISSORY NOTES 

The notes are secured by an interest in real property as set forth security agreements between the Company and borrower. During the three-month and nine-month periods ended September 30, 2022, the Company recognized interest income of $919. The Company’s management did not recognize any estimated credit loss for the notes; however, the management closely monitors the liquidity of the debtors for changes in circumstances that may affect the carrying value of these notes. The notes are considered level 3 financial instruments; however, as a result of the short terms to maturity, their amortized costs approximate their fair values.

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities on September 30, 2022 and December 31, 2021 are as follows:

SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 

NOTE 5 - 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:

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.

On August 27, 2021, the Company completed an initiative where it entered into a Modification Agreement (the “Modification”) with current Series A Convertible Preferred Stockholders to modify their conversion privileges to align and support the current management team’s initiatives with the goal of benefiting shareholders. The modification agreement provides the preferred stockholders the right to convert their preferred shares 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 was pursued for the benefit of the Company’s common shareholders to mitigate the potential risk of diluting their shareholding in the event that the Company undertakes additional financing transactions to fund the Company’s expansion initiatives.

As of September 30, 2022, and December 31, 2021, there were zero shares of Series A Convertible Preferred Stock issued and outstanding.

Common Stock

Each share of common stock entitles the holder as of the applicable record date to one vote, in person or by proxy, on any matter that is submitted to a vote or for the consent of the stockholders of the Corporation.

On February 16, 2022 and March 16, 2022, the Company initiated a private placement offering for the sale of up to 150,000,000 shares of the Company’s common stock, at price of $0.006 per share, for total consideration to the Company of $900,000. The issuance price was updated during the three months ending June 30, 2022 to $0.005 per share.

During the three months ended March 31, 2022, the Company issued 12,500,000 shares of common stock at $0.006 per share for cash of $75,000. Upon the change of the share price for the private placement, an additional 2,500,000 common shares were issued during the three months ended June 30, 2022.

During the three months ended June 30, 2022, the Company issued 89,600,000 shares of common stock at $0.005 per share for cash of $448,000. An equal number of Warrants (104,600,000) were issued during this period as part of the private placement with an exercise price of $0.01 and a 5-year expiration.

On August 12, 2022, the Company initiated a private placement offering and entered into subscription agreements with certain accredited investors for the sale of 153,846,154 common shares of the Company’s common stock at $0.0065 per share, and an equal number of Warrants with an exercise price of $0.013 for a total consideration to the Company of $1,000,000. During the three months ended September 30, 2022, the Company issued 7,846,154 shares of common stock at $0.0065 per share for cash of $51,000.

The total shares issued during the nine months ending September 30, 2022 for the private placements was 112,446,154 common shares at $0.005 and $0.0065 per share for total cash of $574,000.

As of September 30, 2022, and December 31, 2021, there were 2,689,190,084 and 2,575,909,930 shares of Common Stock issued and outstanding, respectively.

Shares to be Issued

During the three months ended September 30,2022, in connection to mentioned private placement offering on August 12, 2022, the Company received $250,000 in cash proceeds. As of September 30, 2022, and up to the date of this report, the shares have not been issued. The Shares will be restricted securities and subject to required holding periods under Rule 144.

Additional paid in capital

Stock Options

On August 4, 2021, in order to recognize the substantive efforts of Leslie Bocskor, Benjamin Rote and Dennis Forchic for their contributions to the company without compensation for the period between May 2020 and August 2021 for Mr. Bocskor and between August 2020 and August 2021 for Messrs. Rote and Forchic, the Board voted to formalize employment agreements with Messrs. Bocskor and Rote, and an advisory agreement with Mr. Forchic. Pursuant to their respective employment agreements, Mr. Bocskor was granted the option to purchase 150 million shares of common stock in the Company and Mr. Rote was granted the option to purchase 100 million shares of common stock of the Company at a conversion price of $0.01. Pursuant to his advisory agreement, Mr. Forchic was granted the option to purchase 150 million shares of common stock of the Company at a conversion price of $0.01 per share of common stock. The options granted to each of Messrs. Bocskor, Rote and Forchic vested immediately upon the granting of such options. On the one-year anniversary of their respective agreements, additional options will be granted to each of Messrs. Bocskor, Rote and Forchic to purchase up to 150 million, 100 million and 150 million shares of common stock, respectively, at a conversion price of $0.015 per share of common stock.

In addition, the Board, consisting of Directors Rick Gutshall and Lang Coleman, having not received any consideration over the past two years, will each be granted the option to purchase up to 5 million shares of common stock at a price of $0.01 per share of common stock. Such options will vest immediately upon the grant date. The company’s legal counsel will be granted the option to purchase 10 million shares of common stock of the Company at a price of $0.01 per share of common stock, which option will vest immediately upon grant, under the same terms as the options granted to the Board.

In June 2022, board members Keith Crouch and Michael Blicharski were each granted the option to purchase up to 10 million shares of common stock, for a total of 20 million shares, at a price of $0.01 per share of common stock. Such options will vest quarterly with the first quarter vesting upon the grant date.

Valuation

The Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:

SCHEDULE OF STOCK OPTIONS ASSUMPTIONS 

During the year ended December 31, 2021, the Company granted 820,000,000 common stock options valued at $8,004,855. During the nine months ended September 30, 2022, the Company recognized stock option expense of $2,377,538, of which $2,372,538 was to related parties, and as of September 30, 2022, $96,380 remains unamortized, of which $96,380 is with related parties. The intrinsic value of the 840,000,000 options outstanding as of September 30, 2022, was $220,000.

The following is a summary of stock option activity during the nine months ended September 30, 2022:

SCHEDULE OF STOCK OPTION 

Warrants

As part of the February 16, 2022 private placement, the Company granted one warrant to purchase a common share for each common share purchased. The warrants issued have an exercise price of $0.01 per warrant and expire five years from the date of grant. A total of 104,600,000 warrants were granted.

As part of the August 12, 2022 private placement, the Company granted two warrants to purchase a common share for each common share purchased. The warrants issued have an exercise price of $0.013 per warrant and expire five years from the date of grant. A total of 7,846,154 warrants were granted.

Valuation

The Company utilizes the Black-Scholes model to value its warrants. The Company utilized the following assumptions:

SCHEDULE OF WARRANTS ASSUMPTIONS 

The following is a summary of warrant activity during the nine months ended September 30, 2022:

SCHEDULE OF WARRANTS ACTIVITY 

The warrants were valued at $701,477 and settled through additional paid in capital.

NOTE 6 - NET INCOME (LOSS) PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods. Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares consist of convertible preferred stock and convertible notes that are computed using the if-converted method, and outstanding warrants that are computed using the treasury stock method. Antidilutive stock awards consist of stock options that would have been antidilutive in the application of the treasury stock method.

SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED 

For the three and nine months ended September 30, 2022, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss) per share.

NOTE 7- RELATED PARTY TRANSACTIONS

On February 8, 2022, the Company entered an assets acquisition Letter of Intent (“LOI”) with an entity under common control with the Company. During the nine months ended September 30, 2022, in connection with the LOI, the Company paid advance of $130,000 for acquisition of assets.

During the nine months ended September 30, 2022 and 2021, the Company paid consulting fees of $307,000 and $0, communication and technology services of $95,194 and $0, late charge of $508 and $15,980 to an entity under common control of the Company, respectively.

During the nine months ended September 30, 2022 and 2021, the Company recognized stock option expense for related parties of $2,372,538 and $4,753,205, respectively. The stock option-based compensation recognized in additional paid-in-capital.

As of September 30, 2022, and December 31, 2021, the Company was obligated to a related party, for an unsecured, non-interest-bearing demand with balance of $0 and $33,902, respectively.

NOTE 8- COMMITMENTS AND CONTINGENCIES

On March 24, 2022, the Company entered into an agreement with F.E.A. Strategies Group, LLC. as advisory assistance on suitable investment strategies to raise growth capital for the Company. The Company agreed to settle 50% of the advisory fee with 834,000 shares of common stock valued at $5,000. As of September 30, 2022, the company had issued the 834,000 shares of common stock.

NOTE 9- SUBSEQUENT EVENTS

Management has evaluated subsequent events through the date these financial statements were available to be issued. Based on our evaluation no material events have occurred that require disclosure.

On November 1, due to increased interest from certain accredited investors the Company extended the duration of the August private placement offering to December 31, 2022 and increased the maximum funding amount to $1,300,000.

On November 1 and 8, 2022, the Company granted two loans of $25,000 and $20,000, respectively, receiving secured Promissory Notes with an annual interest rate of 8% maturing in 120 days.

Results of Operations

The following tables presents our operating results for the three and nine months ended September 30, 2022 compared to September 30, 2021:

Three months ended September 30, 2022 compared to three months ended September 30, 2021

Nine months ended September 30, 2022 compared to nine months ended September 30, 2021

Revenues

During the nine months ended September 30, 2022 and 2021, the Company generated no revenue.

Operating Expenses

Total operating expenses for the nine months ended September 30, 2022 and 2021 were $2,925,596 and $4,879,842, respectively, for an aggregate decrease of $1,954,246 or 40%. The aggregate decrease was primarily driven by a decrease in general and administrative expenses associated with executive stock options compensation.

Other Income (Expense)

Total other income (expense) for the nine months ended September 30, 2022 and 2021 were $1,857 and $43,932,158, respectively. The decrease in other income is primarily related to the change in the fair value of the embedded derivative liability from $43,879,414 to $0.

Net Loss

As a result of the factors discussed above, net income for the nine months ended September 30, 2022 and 2021 was a loss of $2,923,739 compared to a gain of $39,052,316, respectively, for an aggregate decrease of $41,976,055, or 107% related primarily to the elimination of the derivative liability gains.

Liquidity and Capital Resources

The following table provides selected financial data about our Company as of September 30, 2022 and December 31, 2021, respectively.

Working Capital

Cash Flows

As of September 30, 2022, our Company’s cash balance was $191,869 and total assets were $483,507. As of December 31, 2021, our Company’s cash balance was $232,850 and total assets were $235,601.

As of September 30, 2022, our Company had total liabilities of $114,511 compared with total liabilities of $144,404 as of December 31, 2021.

As of September 30, 2022, our Company had working capital of $238,996 compared with working capital of $91,197 as of December 31, 2021. The increase in working capital was primarily attributed to proceeds raised from the issuance of common stock and warrants, and shares of common stock to be issued included in financing activities.

Cash Flow used in Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2022 and 2021 were $634,981 and $181,783 respectively, for an increase of $453,198. The increase in net cash used in operating activities is primarily related to payment for consulting and vendor services, payments on accounts payables and accrued liabilities, merger and acquisition related costs, and business development.

Cash Flow used in Investing Activities

For the nine months ended September 30, 2022 and 2021, the Company invested $230,000 and $0 respectively, for an increase of $230,000. The increase in investing activities is related to acquisitions and business development initiatives.

Cash Flow provided by Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2022 and 2021 were $824,000 and $371,800, respectively. During the nine months ended September 30, 2022, the increase in cash from financing activities was the result of the Company’s receipt of cash proceeds from private placement offerings.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer, Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

The Company’s management, consisting solely of the Company’s Chief Executive Officer, Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that, as of September 30, 2022, the Company’s disclosure controls and procedures were not effective because of the following internal control over financial reporting deficiencies:

● We currently have an insufficient complement of personnel with the necessary accounting expertise and an inadequate supervisory review structure with respect to the requirements and application of US GAAP and SEC disclosure requirements.

● We currently have insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

● We currently lack a formal process and timeline for closing the books and records at the end of each reporting period and such weaknesses restrict the Company’s ability to timely gather, analyze and report information relative to the financial statements.

● Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist.

We will continue to monitor and evaluate the effectiveness of our disclosure controls and procedures and our internal controls over financial reporting on an ongoing basis and are committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of Securities Exchange Act Rule 13a-15 or Rule 15d-15 that occurred in the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION