UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended | |
or
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from | to |
| Commission File Number | |
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ ☐ 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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | (Do not check if a smaller reporting company) | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act)
☐
YES ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 2,831,670.85 and shares issued and outstanding, respectively as of September 30, 2023.
TABLE OF CONTENTS
| PART I - FINANCIAL INFORMATION | F-1 | |
| Item 1. | Financial Statements | F-1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 4 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 6 |
| Item 4. | Controls and Procedures | 6 |
| PART II - OTHER INFORMATION | 7 | |
| Item 1. | Legal Proceedings | 7 |
| Item 1A. | Risk Factors | 7 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 7 |
| Item 3. | Defaults Upon Senior Securities | 7 |
| Item 4. | Mine Safety Disclosures | 7 |
| Item 5. | Other Information | 7 |
| Item 6. | Exhibits | 7 |
| SIGNATURES | 8 | |
| 2 |
FORWARD-LOOKING STATEMENTS
Except for any historical information contained herein, the matters discussed in this quarterly report on Form 10-Q contain certain “forward-looking statements’’ within the meaning of the federal securities laws. This includes statements regarding our future financial position, economic performance, results of operations, business strategy, budgets, projected costs, plans and objectives of management for future operations, and the information referred to under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
These forward-looking statements generally can be identified by the use of forward-looking terminology, such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “continue” or similar terminology, although not all forward-looking statements contain these words. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, you are cautioned that any such forward-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Although we believe that the expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been materially different from the results expressed or implied by such forward-looking statements. Important factors that may cause actual results to differ from projections include, for example:
| ● | the success or failure of management’s efforts to implement our business plan; | |
| ● | our ability to fund our operating expenses; | |
| ● | our ability to compete with other companies that have a similar business plan; | |
| ● | the effect of changing economic conditions impacting our plan of operation; and | |
| ● | our ability to meet the other risks as may be described in future filings with the Securities and Exchange Commission (the “SEC”). |
Unless otherwise required by law, we also disclaim any obligation to update our view of any such risks or uncertainties or to announce publicly the result of any revisions to the forward-looking statements made in this quarterly report on Form 10-Q.
When considering these forward-looking statements, you should keep in mind the cautionary statements in this quarterly report on Form 10-Q and in our other filings with the SEC. We cannot assure you that the forward-looking statements in this quarterly report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may prove to be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time-frame, or at all.
| 3 |
PART I - FINANCIAL INFORMATION
INDOOR HARVEST CORP
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Notes receivable, net | ||||||||
| Prepaid expenses and other receivable | ||||||||
| Total Current Assets | ||||||||
| Prepayment for acquisitions - related party | ||||||||
| Acquisition deposit | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Convertible notes payable, net of debt discount of $ | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock: authorized; $ par value; Series A Convertible Preferred stock: designated, shares issued and outstanding | ||||||||
| Common stock: authorized; $ par value; and shares issued and outstanding, respectively | ||||||||
| Additional paid in capital | ||||||||
| Shares to be issued | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ( | ) | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| F-1 |
INDOOR HARVEST CORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Operating Expenses | ||||||||
| Professional fees | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | ||||||||
| Amortization of OID | ( | ) | ||||||
| Interest Expense | ( | ) | ||||||
| Total other income (expenses) | ( | ) | ||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Comprehensive income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per common share | ||||||||
| Basic | $ | ) | $ | ) | ||||
| Diluted | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-2 |
INDOOR HARVEST CORP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | $ | $ | ||||||
| Operating Expenses | ||||||||
| Professional fees | ||||||||
| General and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | ||||||||
| Amortization of OID | ( | ) | ||||||
| Interest Expense | ( | ) | ||||||
| Total other income (expenses) | ( | ) | ||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Comprehensive income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted income (loss) per common share | ||||||||
| Basic | $ | ) | $ | ) | ||||
| Diluted | $ | ) | $ | ) | ||||
| Weighted average number of common shares outstanding | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-3 |
INDOOR HARVEST CORP
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Nine months Ended September 30, 2023
| Series A Convertible | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Common | Total | ||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid in Capital | Stock to be Issued | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance - December 31, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | | |||||||||||||||||||||||
| Common stock and warrants issued | - | ( | ) | |||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Common stock and warrants issued | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Proceeds received shares to be issued | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
| Common stock and warrants issued | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Proceeds received shares to be issued | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||
For the Nine months Ended September 30, 2022
| Series A Convertible | ||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Additional | Common | Total | ||||||||||||||||||||||||||||
Number of Shares | Amount | Number of Shares | Amount | Paid in Capital | Stock to be Issued | Accumulated Deficit | Stockholders’ Equity | |||||||||||||||||||||||||
| Balance - December 31, 2021 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
| Common stock issued for cash and warrant | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - March 31, 2022 | ( | ) | ||||||||||||||||||||||||||||||
| Common stock issued for cash and warrant | - | |||||||||||||||||||||||||||||||
| Common stock issued for cash -adjusted offerring price related to quarter 1st. | - | ( | ) | |||||||||||||||||||||||||||||
| Common stock issued for services | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - June 30, 2022 | ( | ) | $ | |||||||||||||||||||||||||||||
| Common stock issued for cash and warrant | - | |||||||||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Proceeds received shares to be issued | - | - | ||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Balance - September 30, 2022 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-4 |
INDOOR HARVEST CORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile Net Income to Net Cash provided by operations | ||||||||
| Accrued interest – notes receivable | ( | ) | ||||||
| Amortization debt discount - Notes Receivable | ( | ) | ||||||
| Amortization of debt discount – interest expense | ||||||||
| Stock based compensation | ||||||||
| Escrow account | ( | ) | ||||||
| Prepaid expenses and other receivable | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Due to related party | ( | ) | ||||||
| Net cash provided by operating activities | $ | ( | ) | $ | ( | ) | ||
| INVESTING ACTIVITIES | ||||||||
| Payments made for acquisition of 369 Hemp | $ | ( | ) | |||||
| Payments made for acquisition of MetaBiogenix (US) | ( | ) | ||||||
| Investment in short term notes | ( | ) | ||||||
| Prepayments for acquisition – related party | ( | ) | ||||||
| Net cash provided by investing activities | $ | ( | ) | ( | ) | |||
FINANCING ACTIVITIES | ||||||||
| Proceeds from convertible notes | ||||||||
| Proceeds from stock subscriptions for shares to be issued | ||||||||
| Proceeds from issuance of common stock and warrants | ||||||||
| Net Cash provided by financing activities | $ | $ | ||||||
| Net cash increase for period | $ | ( | ) | $ | ( | ) | ||
| Cash at beginning of period | $ | $ | ||||||
| Cash at end of period | $ | $ | ||||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for interest | ||||||||
| Cash paid for taxes | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
| F-5 |
INDOOR HARVEST CORP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,2023
(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, 2022, 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.
| F-6 |
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.
Acquisition deposit
The
acquisitions of Hemp369 and MetaBioGenix have not been consummated at this time but are still contemplated. There are no letters or documents
suggesting that any of the parties linked thereto have abandoned the transactions and they will move forward and be completed in the
near future. For this reason, all payments from the Company are currently classified as acquisition deposit until legal completion of
the transactions. Hemp369 and MetaBioGenix has a total of $
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).
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.
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).
| F-7 |
The following table summarizes fair value measurements by level at September 30, 2023 and December 31, 2022, measured at fair value on a recurring basis:
| September 30,2023 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Notes receivables, net | ||||||||||||||||
| December 31,2022 | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Notes receivable, net | $ | $ | ||||||||||||||
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, 2023, incurred losses from its operations and did not generate cash from its operation for the past two years and nine months ended September 30, 2023. 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.
| F-8 |
NOTE 3 – NOTES RECEIVABLE
During
the nine months ended September 30, 2023, the Company granted loans of $
| Issuance date | Amount | Maturity date | Rate | Original Issue Discount | 2023 | 2022 | ||||||||||||||||
The
notes are secured by an interest in real property as set nine security agreements between the Company and borrower. During the nine months
ended September 30, 2023, the Company recognized interest income of $
NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities on September 2023 and December 31, 2022 are as follows:
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Accounts payable | $ | $ | ||||||
| Credit card | ||||||||
| Accrued expenses | ||||||||
| Accrued management fee | ||||||||
| $ | $ | |||||||
| F-9 |
NOTE 5 - STOCKHOLDERS’ EQUITY
Common stock
On
August 1, 2022, the Company initiated a private placement offering for the sale of up to shares of the Company’s common
stock, at price of $ per share and an equal number of Warrants with an exercise price of $
During
the three months ended March 31, 2022, the Company issued shares of common stock at $ per share for cash of $
Shares to be issued
During
the year ended December 31, 2022, in connection with the mentioned private placement offering on August 12, 2022, the Company received
$
Additional paid in capital
Stock Options
In Q2 2023, consultants were each granted the option to purchase shares of common stock; Ken Tapp million shares, Aaron Serruya million shares, Kevin Elder million shares, Gordon Kats million shares; for a total of million shares, at a price of $ per share of common stock. Such options will vest quarterly with the first quarter vesting upon the grant date.
In Q3 2023, consultant Summer Schnog was granted the option to purchase million shares of common stock, at a price of $ per share of common stock. Such options will vest quarterly with the first quarter vesting upon the grant date.
| F-10 |
Valuation
The Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:
| Options Outstanding | Weighted Average | |||||||||||
| Number of | Weighted Average | Remaining life | ||||||||||
| Options | Exercise Price | (years) | ||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | - | |||||||||||
| Forfeited/canceled | - | |||||||||||
| Outstanding, September 30, 2023 | ||||||||||||
| Exercisable options, September 30, 2023 | $ | |||||||||||
Warrants
In
Q3 2023, an investor warrant total of
Valuation
The Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:
The following is a summary of warrant activity during the nine months ended September 30, 2023.
| Warrants Outstanding | Weighted Average | |||||||||||
| Number of | Weighted Average | Remaining life | ||||||||||
| Warrants | Exercise Price | (years) | ||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Forfeited/canceled | ||||||||||||
| Outstanding, September, 2023 | ||||||||||||
| $ | ||||||||||||
| F-11 |
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.
Net loss per share of common stock requires presentation of basic earnings per share on the face of the statements of operations for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic earnings per share computation. In the accompanying financial statements, basic loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock and potentially dilutive outstanding shares of common stock during the period to reflect the potential dilution that could occur from common shares issuable through contingent share arrangements, stock options and warrants unless the result would be antidilutive.
The dilutive effect of warrants and stock options subject to vesting and other share-based payment awards is calculated using the “treasury stock method,” which assumes that the “proceeds” from the exercise of these instruments are used to purchase common shares at the average market price for the period. The dilutive effect of convertible securities is calculated using the “if-converted method.” Under the if-converted method, securities are assumed to be converted at the beginning of the period, and the resulting common shares are included in the denominator of the diluted calculation for the entire period being presented.
Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Warrants | $ | $ | ||||||
| Stock Options | $ | $ | ||||||
| $ | $ | |||||||
| F-12 |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (Gain) loss on change in fair value of derivatives | ||||||||||||||||
| Interest on convertible debt | ||||||||||||||||
| Net income (loss) - diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Denominator: | ||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Effect of dilutive shares | ||||||||||||||||
| Diluted | ||||||||||||||||
| Net income (loss) per common share: | ||||||||||||||||
| Basic | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
For the three and nine months ended September 30, 2023, 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, 2023, in connection with the LOI, the Company paid advance of $
During
the nine months ended September 30, 2023 and 2022, the Company paid consulting fees of $
| F-13 |
NOTE 8- ACQUISITION
On
April 28, 2023, The Company entered into a Membership Interest and Stock Purchase Agreement with an individual (Seller) to buy
Under
the terms of the Agreement, the aggregate purchase price of $
On
April 30, 2023, Indoor Harvest Corp. (“Indoor Harvest”) entered into a Membership Interest and Stock Purchase Agreement with
Metabiogenix USA, LLC, a Texas limited liability company (the “Company”), Metabiogenics, Ltd., S.A. de C.V. and other individual
members of the Company, (each a “Seller” and collectively the “Sellers”), and Sellers owns all of the issued
and outstanding membership interests (the “Membership Interests”) of the Company. The Agreement provides that, subject to
the terms and conditions set forth therein, Indoor Harvest will acquire a sixty percent (
Under
the terms of the Agreement, the aggregate purchase price of $
Metabiogenix USA, LLC, is the officially licensed distributor of Metabiox® across the Western Hemisphere (North, South, and Central America), and Spain. Metabiox® was developed by the Japanese Medical Institute and is produced in Japan.
On
April 12,2023, the Company’s board of directors approved to issue a convertible note of $
The
acquisition process of Hemp369 and MetaBioGenix is taking longer than anticipated due to initial investors’ liquidity change. The
delay could result in the loss of valuable employees, the disruption of ongoing productions, and business relationships, any of which
could adversely affect our ability to achieve the anticipated benefits of the acquisition. In order to sustain the paused acquisition,
the Company has continued to make payment to Hemp369 during the third quarter of 2023, in the sum of $
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.
| F-14 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation |
Results of Operations
The following table presents our operating results for the three and nine months ended September 30, 2023 compared to September 30, 2022:
Three months ended September 30, 2023 compared to three months ended September 30, 2022
| Three Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | Change | % | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | 189,414 | 251,468 | (62,055 | ) | (25 | %) | ||||||||||
| General and administrative expenses | 69,056 | 323,505 | (254,449 | ) | (79 | %) | ||||||||||
| Total operating expenses | 258,470 | 574,973 | (316,504 | ) | (559 | %) | ||||||||||
| Loss from operations | (258,470 | ) | (574,973 | ) | (316,504 | ) | (559 | %) | ||||||||
| Other expense | ||||||||||||||||
| Interest income | - | 1,857 | -1,857 | (100 | %) | |||||||||||
| Interest expense | (61,141 | ) | - | (61,141 | ) | 100 | % | |||||||||
| Amortization of debt discount | (52,083 | ) | - | (52,083 | ) | 100 | % | |||||||||
| Change in fair value of embedded derivative liability | - | - | - | - | ||||||||||||
| Total other expense | (113,224 | ) | 1,857 | (115,081 | ) | (6197 | %) | |||||||||
| Net loss | $ | (371,694 | ) | $ | (574,973 | ) | $ | 201,423 | (35 | %) | ||||||
| Nine Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | Change | % | |||||||||||||
| Revenue | $ | - | $ | - | $ | - | - | |||||||||
| Operating expenses | ||||||||||||||||
| Professional fees | 685,701 | 1,269,672 | (583,971 | ) | (46 | %) | ||||||||||
| General and administrative expenses | 376,451 | 1,655,924 | (1,279,473 | ) | (77 | %) | ||||||||||
| Total operating expenses | 1,062,152 | 2,925,596 | (1,863,444 | ) | (64 | %) | ||||||||||
| Loss from operations | (1,062,152 | ) | (2,925,596 | ) | 1,863,444 | (64 | %) | |||||||||
| Other expense | ||||||||||||||||
| Interest income | 3,373 | 1,857 | 1,516 | 82 | % | |||||||||||
| Interest expense | (312,500 | ) | - | (312,500 | )- | 100 | % | |||||||||
| Amortization of OID | (66,092 | ) | - | (66,092 | ) | 100 | % | |||||||||
| Change in fair value of embedded derivative liability | - | - | - | - | ||||||||||||
| Total other expense | (375,219 | ) | 1,857 | (377,076 | ) | (20306 | %) | |||||||||
| Net loss | $ | (1,437,370 | ) | $ | (2,923,739 | ) | $ | 1,486,369 | (51 | %) | ||||||
| September 30, | December 31, | |||||||||||||||
| 2023 | 2022 | Change | % | |||||||||||||
| Current assets | $ | 51,337 | $ | 433,904 | $ | (382,567 | ) | (88 | %) | |||||||
| Current liabilities | $ | 886,491 | $ | 233,378 | $ | 653,113 | 280 | % | ||||||||
| Working capital deficiency | $ | (835,154 | ) | $ | 200,526 | $ | (1,035,680 | ) | (516 | %) | ||||||
Revenues
During the nine months ended September 30, 2023 and 2022, the Company generated no revenue.
Operating Expenses
Total operating expenses for the nine months ended September 30, 2023 and 2022 were $1,062,152 and $2,925,595, respectively, for an aggregate decrease of $1,863,444 or 64%. The aggregate decrease was primarily driven by a decrease in general and administrative expenses associated with executive stock options compensation.
| 4 |
Net Loss
As a result of the factors discussed above, net loss for the nine months ended September 30, 2023 and 2022 was a loss of $1,437,370compared to a loss of $2,923,739, respectively, for an aggregate decrease of $1,486,369, or 64% related primarily to the elimination of professional fees and SG&A expenses.
Liquidity and Capital Resources
The following table provides selected financial data about our Company as of September 30, 2023 and December 31, 2022, respectively.
Working Capital
| September 30, 2023 | December 31, 2022 | Change | % | |||||||||||||
| Current assets | $ | 51,337 | $ | 433,904 | $ | (382,567 | ) | (88 | %) | |||||||
| Current liabilities | $ | 886,491 | $ | 233,378 | $ | 653,113 | 280 | % | ||||||||
| Working capital deficiency | $ | (835,154 | ) | $ | 200,526 | $ | (1,035,680 | ) | (516 | %) | ||||||
Cash Flows
| Nine Months Ended September 30, | ||||||||||||||||
| 2023 | 2022 | Change | % | |||||||||||||
| Cash used in operating activities | $ | (953,327 | ) | $ | (634,981 | ) | $ | (318,346 | ) | 50 | % | |||||
| Cash used in investing activities | $ | (269,650 | ) | $ | (230,000 | ) | $ | (39,650 | ) | 17 | % | |||||
| Cash provided by financing activities | $ | 1,003,250 | $ | 824,000 | $ | 179,250 | 22 | % | ||||||||
| Net Change in Cash During Period | $ | (219,727 | ) | $ | (40,981 | ) | $ | (178,746 | ) | 436 | % | |||||
| Balance Sheet Data: | September 30, 2023 | December 31, 2022 | Change | % | ||||||||||||
| Cash | $ | 6,504 | $ | 226,231 | $ | (219,727 | ) | (97 | %) | |||||||
| Total assets | $ | 636,576 | $ | 578,904 | $ | 57,672 | 10 | % | ||||||||
| Total liabilities | $ | 886,491 | $ | 233,378 | $ | 653,113 | 280 | % | ||||||||
| Stockholders’ equity | $ | (249,915 | ) | $ | 345,526 | $ | (595,441 | ) | (172 | %) | ||||||
As of September 30, 2023, our Company’s cash balance was $6,504 and total assets were $636,576. As of December 31, 2022, our Company’s cash balance was $226,231 and total assets were $578,094.
As of September 30, 2023, our Company had total liabilities of $886,491 compared with total liabilities of $233,378 as of December 31, 2022.
| 5 |
As of September 30, 2023, our Company had working capital deficiency of $835,154 compared with working capital deficiency of $200,526 as of December 31, 2022. The decrease in working capital was primarily attributed to the lack of funding.
Cash Flow used in Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2023 and 2022 were $(953,327) and ($634,981) respectively, for an increase of $318,346. 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, 2023 and 2022, the Company invested ($269,650) and $230,000 respectively, for an decrease of $39,650. The decrease 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, 2023, and 2022 were $1,003,250 and $824,000, respectively, for an increase of $179,250. During the nine months ended September 30, 2023, the increase in cash from financing activities was the result of the Company’s receipt of cash proceeds from issuance of common stock and warrants.
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
As a “smaller reporting company”, we are not required to provide the information required by this Item.
| Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer, Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
The Company’s management, consisting solely of the Company’s Chief Executive Officer, Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer has concluded that, as of September 30, 2023, 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| 6 |
PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
From time to time we may become involved in various legal proceedings that arise in the ordinary course of business. We are not currently a party to any material legal proceeding.
| Item 1A. | Risk Factors |
As a “smaller reporting company”, we are not required to provide the information required by this Item.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On August 1, 2022, the Company commenced 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. A total of 7,846,154 common shares and warrants were issued and granted, respectively.
| Item 3. | Defaults Upon Senior Securities |
The Company did not make the necessary payment at maturity to Quick Capital LLC; at the scheduled July 22 due date of convertible note payable. The face value of the loan was $312,500 with a $62,500 OID. In the event of default, the principal of the note is increased by 15%, and the default interest is 15% annum.
| Item 4. | Mine Safety Disclosures |
Not Applicable.
| Item 5. | Other Information |
(a) Not applicable.
(b) Not applicable.
| Item 6. | Exhibits |
The following exhibits are included as part of this report:
| INCORPORATED BY REFERENCE | ||||||||
| Exhibit | Description | Form | Exhibit | Filing Date | ||||
| (31) | Rule 13a-14(a)/15d-14(a) Certifications | |||||||
| * | Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer | |||||||
| * | Section 302 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Financial Officer | |||||||
| (32) | Section 1350 Certifications | |||||||
| * | Section 906 Certification under the Sarbanes-Oxley Act of 2002 of the Principal Executive Officer and Principal Financial Officer | |||||||
| (101) | Interactive Data Files | |||||||
| * | Inline XBRL Instance Document | |||||||
| * | Inline XBRL Taxonomy Extension Schema Document | |||||||
| * | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| * | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| * | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| * | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
| † | Management Contract or Compensation Plan | |||||||
| * | Filed herewith. In addition, in accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed. | |||||||
| 7 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| INDOOR HARVEST CORP. | |
| (Registrant) | |
| Dated: December 1, 2023 | /s/ Leslie Bocskor |
| Leslie Bocskor | |
| Chief Executive Officer, Chief Financial Officer | |
| (Principal Executive Officer)(Principal Financial Officer) |
| 8 |