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INQD Indoor Harvest

Filed: 27 Aug 21, 5:24pm

 

 

 

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 filerAccelerated filer
    
Non-accelerated filerSmaller 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

 

  PAGE
PART I  
   
Item 1.Business4
Item 1A.Risk Factors9
Item 1B.Unresolved Staff Comments9
Item 2.Properties9
Item 3.Legal Proceedings9
Item 4.Mine Safety Disclosures9
   
PART II  
   
Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities9
Item 6.Selected Financial Data12
Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations12
Item 7A.Quantitative and Qualitative Disclosures about Market Risk15
Item 8.Financial Statements and Supplementary Data15
Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure15
Item 9A.Controls and Procedures16
Item 9B.Other Information17
   
PART III  
   
Item 10.Directors, Executive Officers and Corporate Governance17
Item 11.Executive Compensation20
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters22
Item 13.Certain Relationships and Related Transactions, and Director Independence23
Item 14.Principal Accounting Fees and Services25
   
PART IV  
   
Item 15.Exhibits26
   
Signatures29

 

2

 

 

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.

 

3

 

 

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.

 

4

 

 

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.

 

5

 

 

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.

 

6

 

 

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.

 

7

 

 

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.

 

8

 

 

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:

 

 We would not be able to pay our debts as they become due in the usual course of business; or
   
 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.

 

9

 

 

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.

 

10

 

 

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.

 

11

 

 

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.

 

12

 

 

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%

 

13

 

 

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.

 

14

 

 

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.

 

15

 

 

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.

 

16

 

 

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.

 

17

 

 

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.

 

18

 

 

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.

 

19

 

 

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.

 

20

 

 

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.

 

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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.

 

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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.

 

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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.

 

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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.

 

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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).

 

10.1 Investment Agreement with Tangiers Global, LLC. (Incorporated by reference to exhibit 10.1 in the Registrant’s Form 8- K filed on October 13, 2017).
   
10.2 Registration Rights Agreement with Tangiers Global, LLC. (Incorporated by reference to exhibit 10.2 in the Registrant’s Form 8-K filed on October 13, 2017).

 

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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).

 

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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

 

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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, 2021INDOOR 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    

 

29

 

 


INDOOR HARVEST CORP

Consolidated Financial Statements

December 31, 2020 and 2019

 

Contents Page
   
Reports of Independent Registered Public Accounting Firms F-2
   
Consolidated Balance Sheets F-3
   
Consolidated Statements of Operations F-4
   
Consolidated Statements of Stockholders’ Deficit F-5
   
Consolidated Statements of Cash Flows F-6
   
Notes to Consolidated Financial Statements F-7

 

F-1
 

 

 

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

 

 

F-2
 

 

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.

 

F-3
 

 

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.

 

F-4
 

 

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.

 

F-5
 

 

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.

 

F-6
 

 

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.

 

F-7
 

 

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).

 

F-8
 

 

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.

 

F-9
 

 

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.

 

F-10
 

 

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.

 

F-11
 

 

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.

 

F-12
 

 

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.

 

F-13
 

 

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.

 

F-14
 

 

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.

 

F-15
 

 

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

 

F-16
 

 

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 $-  $- 

 

F-17
 

 

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.

 

F-18