NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2022
(UNAUDITED)
NOTE
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature
of Operations and Organization
Indoor
Harvest Corp (the “Company,”) is a Texas corporation formed on November 23, 2011. Our principal executive office was located
at 7401 W. Slaughter Lane #5078, Austin, Texas 78739, and such address is used in the interim. We are in the process of establishing
new offices.
On
August 14, 2019, the Company established a wholly owned subsidiary, IHC Consulting, Inc. (“IHC”), in the State of New York
of the United States of America. IHC Consulting will provide consulting and other services to the Company and others on a contracted
basis.
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
June 30, 2022. 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 unaudited condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance
with accounting principles generally accepted in the United States of America (“GAAP”) and the requirements of Form 10-Q
and Rule 8-03 of Regulation S-X of the U.S. Securities and Exchange Commission. Accordingly, they may not include all of the information
and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements.
Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary
for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.
These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31,
2021, as not all disclosures required by generally accepted accounting principles for annual financial statements may be presented.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Significant
estimates include, but are not limited to, the estimate of percentage of completion on construction contracts in progress at each reporting
period which we rely on as a primary basis of revenue recognition, estimated useful lives of equipment for purposes of depreciation and
the valuation of common shares issued for services, equipment and the liquidation of liabilities.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant inter-company
accounts and transactions have been eliminated in consolidation.
Earnings
(Loss) per Share
Basic
earnings (loss) per share amounts are calculated based on the weighted average number of shares of common stock outstanding during each
period. Diluted earnings (loss) per share is based on the weighted average numbers of shares of common stock outstanding for the periods,
including dilutive effects of stock options, warrants granted and convertible preferred stock. Dilutive options and warrants that are
issued during a period or that expire or are cancelled during a period are reflected in the computations for the time they were outstanding
during the periods being reported. Since Indoor Harvest has incurred losses for all periods, the impact of the common stock equivalents
would be anti- dilutive and therefore are not included in the calculation.
Derivative
Liability
The
Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative
instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and
requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting
for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types
of relationships designated are based on the exposures hedged. At June 30, 2022 and December 31, 2021, the Company did not have any derivative
instruments that were designated as hedges.
Fair
Value of Financial Instruments
As
defined in ASC 820” Fair Value Measurements,” fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes
market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and
the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally
unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value
hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices
in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).
Recently
Issued Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06, ASC Subtopic 470-20 “Debt—Debt with “Conversion and Other Options”
and ASC subtopic 815-40 “Hedging—Contracts in Entity’s Own Equity”. The standard reduced the number of accounting
models for convertible debt instruments and convertible preferred stock. Convertible instruments that continue to be subject to separation
models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition
of a derivative, and that do not qualify for a scope exception from derivative accounting; and, (2) convertible debt instruments issued
with substantial premiums for which the premiums are recorded as paid-in capital. The amendments in this update are effective for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The company
has adopted the ASU as of January 1, 2022, there were no material impacts to the financial statements.
NOTE
2 - GOING CONCERN
The
accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. The Company had minimal
cash as of June 30, 2022, incurred losses from its operations and did not generate cash from its operation for the past two years and
six months ended June 30, 2022. These factors, among others, raise substantial doubt about the Company’s ability to continue as
a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
Company’s continued existence is dependent upon management’s ability to develop profitable operations, continued contributions
from the Company’s executive officers to finance its operations and the ability to obtain additional funding sources to explore
potential strategic relationships and to provide capital and other resources for the further development and marketing of the Company’s
products and business.
NOTE
3 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities at June 30, 2022 and December 31, 2021 are as follows:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
| | |
| | | |
| | |
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Accounts payable | |
$ | 77,194 | | |
$ | 112,315 | |
| Credit card | |
| 11,567 | | |
| 13,191 | |
| Accrued expenses | |
| 15,715 | | |
| 15,715 | |
| Accrued management fee | |
| 3,183 | | |
| 3,183 | |
| Accounts payable and
accrued liabilities | |
$ | 107,659 | | |
$ | 144,404 | |
NOTE
4 - 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. |
Series
A Convertible Preferred Stock
The
Company has designated 15,000,000 shares of Series A Preferred Stock with a par value of $0.01.
The
stated value of each issued share of Series A Convertible Preferred Stock shall be deemed to be $1.00, as the same may be equitably adjusted
whenever there may occur a stock dividend, stock split, combination, reclassification or similar event affecting the Series A Convertible
Preferred Stock. There are no dividends payable on the Series A Convertible Preferred Stock. Each holder of outstanding shares of Series
A Convertible Preferred Stock shall be entitled to cast the number of votes for the Series A Convertible Preferred Stock in an amount
equal to the number of whole shares of common stock into which the shares of Series A Convertible Preferred Stock held by such holder
are convertible as of the record date for determining stockholders entitled to vote on such matter
The
Series A Preferred Stock also had a “down-round” protection feature provided to the investors if the Company subsequently
issued or sold any shares of common stock, stock options, or convertible securities at a price less than the conversion price of $1.00
per common share. The conversion price would be automatically adjustable down to the price of the instrument being issued. As a result
of conversion during the year ended December 31, 2020, the Series A Preferred Stock conversion price was reset to $0.00006 per share.
Upon
any liquidation, dissolution or winding-up of the Company under Texas law, whether voluntary or involuntary, the holders of the shares
of Series A Convertible Preferred Stock shall be paid an amount equal to the aggregate stated value of their shares of Series A Convertible
Preferred Stock, before any payment shall be paid to the holders of common stock, or any other stock ranking on liquidation junior to
the Series A Convertible Preferred Stock, an amount for each share of Series A Convertible Preferred Stock held by such holder equal
to the sum of the Stated Value thereof.
On
August 27, 2021, the Company completed an initiative where it entered into a Modification Agreement (the “Modification”)
with current Series A Convertible Preferred Stockholders to modify their conversion privileges to align and support the current management
team’s initiatives with the goal of benefiting shareholders. The modification agreement provides the preferred stockholders the
right to convert their preferred shares into common shares at a conversion price at the lower of $0.40 (per the original agreement),
or the subsequent per share pricing of a future equity raise greater than Five Hundred Thousand ($500,000) Dollars. This Modification
was pursued for the benefit of the Company’s common shareholders to mitigate the potential risk of diluting their shareholding
in the event that the Company undertakes additional financing transactions to fund the Company’s expansion initiatives.
As
of June 30, 2022, and December 31, 2021, there were zero shares of Series A Convertible Preferred Stock issued and outstanding.
Common
Stock
Each
share of common stock entitles the holder as of the applicable record date to one vote, in person or by proxy, on any matter that is
submitted to a vote or for the consent of the stockholders of the Corporation.
On
February 16, 2022 and March 16, 2022, the Company initiated a private placement offering for the sale of up to 150,000,000 shares of
the Company’s common stock, at price of $0.006 per share, for total consideration to the Company of $900,000. The issuance price
was updated during the three months ending June 30, 2022 to $0.005 per share.
During
the three months ended March 31, 2022, the Company issued 12,500,000 shares of common stock at $0.006 per share for cash of $75,000.
Upon the change of the share price for the private placement, an additional 2,500,000 common shares were issued.
During
the three months ended June 30, 2022, the Company issued 89,600,000 shares of common stock at $0.005 per share for cash of $448,000.
The total shares issued during the six months ending June 30, 2022 for the private placement was 104,600,000 common shares at $0.005
per share for total cash of $523,000.
As
of June 30, 2022, and December 31, 2021, there were 2,681,343,930 and 2,575,909,930 shares of Common Stock issued and outstanding, respectively.
Additional
paid in capital
Stock
Options
On
August 4, 2021, in order to recognize the substantive efforts of Leslie Bocskor, Benjamin Rote and Dennis Forchic for their contributions
to the company without compensation for the period between May 2020 and August 2021 for Mr. Bocskor and between August 2020 and August
2021 for Messrs. Rote and Forchic, the Board voted to formalize employment agreements with Messrs. Bocskor and Rote, and an advisory
agreement with Mr. Forchic. Pursuant to their respective employment agreements, Mr. Bocskor was granted the option to purchase 150 million
shares of common stock in the Company and Mr. Rote was granted the option to purchase 100 million shares of common stock of the Company
at a conversion price of $0.01. Pursuant to his advisory agreement, Mr. Forchic was granted the option to purchase 150 million shares
of common stock of the Company at a conversion price of $0.01 per share of common stock. The options granted to each of Messrs. Bocskor,
Rote and Forchic vested immediately upon the granting of such options. On the one-year anniversary of their respective agreements, additional
options will be granted to each of Messrs. Bocskor, Rote and Forchic to purchase up to 150 million, 100 million and 150 million shares
of common stock, respectively, at a conversion price of $0.015 per share of common stock.
In
addition, the Board, consisting of Directors Rick Gutshall and Lang Coleman, having not received any consideration over the past two
years, will each be granted the option to purchase up to 5 million shares of common stock at a price of $0.01 per share of common stock.
Such options will vest immediately upon the grant date. The company’s legal counsel will be granted the option to purchase 10 million
shares of common stock of the Company at a price of $0.01 per share of common stock, which option will vest immediately upon grant, under
the same terms as the options granted to the Board.
In
July 2022, board members Keith Crouch and Michael Blicharski were each granted the option to purchase up to 10 million shares of common
stock, for a total of 20 million shares, at a price of $0.01 per share of common stock. Such options will vest quarterly with the first
quarter vesting upon the grant date.
Valuation
The
Company utilizes the Black-Scholes model to value its stock options. The Company utilized the following assumptions:
SCHEDULE OF STOCK OPTIONS ASSUMPTIONS
| | |
Six months ended | | |
Year ended | |
| | |
June 30, | | |
December 31, | |
| | |
2022 | | |
2021 | |
| Expected term | |
| 5.00 - 5.50 years | | |
| 5.00 - 5.50 years | |
| Expected average volatility | |
| 192 - 203 | % | |
| 198 - 203 | % |
| Expected dividend yield | |
| - | | |
| - | |
| Risk-free interest rate | |
| 0.67 | % | |
| 0.67 | % |
During
the year ended December 31, 2021, the Company granted 820,000,000 common stock options valued at $8,004,855. During the six months ended
June 30, 2022, the Company recognized stock option expense of $1,023,688, of which $1,023,688 was to related parties, and as of June
30, 2022, $469,734 remains unamortized, of which $469,734 is with related parties. The intrinsic value of the 840,000,000 options outstanding
as of June 30, 2022, was $880,000.
The
following is a summary of stock option activity during the six months ended June 30, 2022:
SCHEDULE
OF STOCK OPTION
| | |
Options Outstanding | | |
Weighted Average | |
| | |
Number of | | |
Weighted Average | | |
Remaining life | |
| | |
Options | | |
Exercise Price | | |
(years) | |
| | |
| | |
| | |
| |
| Outstanding, December 31, 2021 | |
| 820,000,000 | | |
$ | 0.01 | | |
| 9.60 | |
| Granted | |
| 20,000,000 | | |
| 0.01 | | |
| 10.00 | |
| Exercised | |
| - | | |
| - | | |
| - | |
| Forfeited/canceled | |
| - | | |
| - | | |
| - | |
| Outstanding, June 30, 2022 | |
| 840,000,000 | | |
$ | 0.01 | | |
| 9.12 | |
| | |
| | | |
| | | |
| | |
| Exercisable options, June 30, 2022 | |
| 425,000,000 | | |
$ | 0.01 | | |
| 9.12 | |
Warrants
As
part of the February 16, 2022 private placement, the company granted one warrant to purchase a common share for each common share purchased.
The warrants issued have an exercise price of $0.01 per warrant and expire five years from the date of grant. A total of 104,600,000
warrants were granted.
Valuation
The
Company utilizes the Black-Scholes model to value its warrants. The Company utilized the following assumptions:
SCHEDULE
OF WARRANTS ASSUMPTIONS
| | |
| Six months ended | |
| | |
| June 30, | |
| | |
| 2022 | |
| Term | |
| 5.00 years | |
| Expected average volatility | |
| 202 - 203 | % |
| Expected dividend yield | |
| - | |
| Risk-free interest rate | |
| 1.96% - 3.01 | % |
The
following is a summary of warrant activity during the six months ended June 30, 2022:
SCHEDULE
OF WARRANTS ACTIVITY
| | |
Warrants Outstanding | | |
Weighted Average | |
| | |
Number of | | |
Weighted Average | | |
Remaining life | |
| | |
Warrants | | |
Exercise Price | | |
(years) | |
| Outstanding, December 31, 2021 | |
- | | |
$ |
- | | |
- | |
| Granted | |
| 104,600,000 | | |
| 0.01 | | |
| 5.00 | |
| Exercised | |
| - | | |
| - | | |
| - | |
| Forfeited/canceled | |
| - | | |
| - | | |
| - | |
| Outstanding, June 30, 2022 | |
| 104,600,000 | | |
$ | 0.01 | | |
| 4.84 | |
The
warrants were valued at $641,964 and settled through additional paid in capital.
NOTE
5 - NET INCOME (LOSS) PER COMMON SHARE
Basic
net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the
periods. Diluted net income per common share is computed using the weighted average number of common and dilutive common equivalent shares
outstanding during the periods. Common equivalent shares consist of convertible preferred stock and convertible notes that are computed
using the if-converted method, and outstanding warrants that are computed using the treasury stock method. Antidilutive stock awards
consist of stock options that would have been antidilutive in the application of the treasury stock method.
SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED
| | |
| | | |
| | |
| | |
Six Months Ended | |
| | |
June 30, | |
| | |
2022 | | |
2021 | |
| Numerator: | |
| | |
| |
| Net income (loss) | |
$ | (2,350,623 | ) | |
$ | (77,370,497 | ) |
| (Gain) loss on change in fair value of derivatives | |
| - | | |
| - | |
| Interest on convertible debt | |
| - | | |
| - | |
| Net income (loss) - diluted | |
$ | (2,350,623 | ) | |
$ | 26,563,544 | |
| | |
| | | |
| | |
| Denominator: | |
| | | |
| | |
| Weighted average common shares outstanding | |
| 2,611,129,223 | | |
| 2,401,396,041 | |
| Effect of dilutive shares | |
| - | | |
| - | |
| Diluted | |
| 2,611,129,223 | | |
| 2,401,396,041 | |
| | |
| | | |
| | |
| Net income (loss) per common share: | |
| | | |
| | |
| Basic | |
$ | (0.00 | ) | |
$ | (0.03 | ) |
| Diluted | |
$ | (0.00 | ) | |
$ | 0.00 | |
For
the six months ended June 30, 2022, the convertible instruments are anti-dilutive and therefore, have been excluded from earnings (loss)
per share.
NOTE
6- COMMITMENTS AND CONTINGENCIES
On
March 24, 2022, the Company entered into an agreement with F.E.A. Strategies Group, LLC. as advisory assistance on suitable investment
strategies to raise growth capital for the Company. The Company agreed to settle 50% of the advisory fee with 834,000 shares of common
stock valued at $5,000. As of June 30, 2022, the company had issued the 834,000 shares of common stock.
NOTE
7- SUBSEQUENT EVENTS
The
Company has assessed all subsequent events from June 30, 2022, through the date these consolidated financial statements were available
to be issued, unless as disclosed below, there are not any material subsequent events that require disclosure in these consolidated financial
statements other than events detailed below.
On
August 1, 2022, the Company initiated a private placement offering and entered into subscription agreements with certain accredited investors
for the sale of One Hundred Fifty Three Million Eight Hundred Forty-Six Thousand One Hundred Fifty-four (153,846,154) Common Shares (the
“Shares”) of the Company’s common stock, par value of $0.001 per share, and an equal number of Warrants with an exercise
price of $0.013 for a total consideration to the Company of One Million ($1,000,000) Dollars. The Shares will be restricted securities
and subject to required holding periods under Rule 144.
The
Company intends to use the net proceeds from the sale of the Shares for general corporate purposes.
