Annual Report (10-k)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

[ ] 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:

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 [X]

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 [X]

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 has been subject to such filing requirements for the past 90 days. Yes [ ] No [X]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 and post such files). Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

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

Large accelerated filer	[ ]	Accelerated filer	[ ]
Non-accelerated filer	[X]	Smaller reporting company	[X]
		Emerging growth company	[X]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes [ ] No [X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant at May 30, 2019) was $830,873, based upon the closing price $0.019 of the registrant’s common stock on that date as reported on the OTCQB marketplace of the OTC Markets Group Inc.

As of May 31, 2019, there were 43,730,188 shares of registrant’s common stock outstanding.

TABLE OF CONTENTS

		PAGE
PART I

Item 1.	Business	4
Item 1A.	Risk Factors	15
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	16
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosures	16

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	18
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	29
Item 9A.	Controls and Procedures	29
Item 9B.	Other Information	31

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	31
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36
Item 13.	Certain Relationships and Related Transactions, and Director Independence	37
Item 14.	Principal Accounting Fees and Services	38

PART IV

Item 15.	Exhibits	39

Signatures		42

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.

Item 1. Business.

Organization

Indoor Harvest Corp (the “Company”) is a Texas corporation formed on November 23, 2011. Our principal executive office is located at 7401 W. Slaughter Lane #5078, Austin, Texas 78739. 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 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 November 12, 2018, the Company’s Board of Directors (the “Board”) amended the Company’s Bylaws, effective on that date.

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 acquistion or an M&A/vertical integration strategy.

We have 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.

At the same time, we are aggressively positioning the Company as an integrated consolidation platform offering other cannabis companies the opportunity to be part of a bigger play, sharing intellectual capital, technology, access to new capital markets and liquidity for investors.

Our focus will be 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. While we don’t have arrangements with such institutions, we are seeking university level science relationships among other relationships.

Our operational expenditures are being refocused to primarily relate d to further our plans to create shareholder value through an M&A and strategic partnership strategy, while developing our technology, launching and completing joint test trials, developing research partnerships and collaboration, and of course the costs related to being a fully reporting company with the SEC.

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.

Changes in Business Operations

Changes in Business Operations

2019 is a continuation of our 2018 restructuring, reorganizing and repositioning for us. Thankfully, with the help of our financing and other relationships or partners, we are now positioning to reemerge with new management, momentum and ideas to further our technology whilst leveraging our public company to create shareholder value.

At the same time, the Company has expanded its vision and mission to enhance and accelerate the creation of new value for shareholders by pursuing a new two-pronged strategy.

The first prong is to continue to look for opportunities to build and deploy our technology designs in partnership with others.

The second prong of the strategy will be to seek out strategic partnerships and M&A opportunities with other synergistic enterprises that can benefit by leveraging our public vehicle and management expertise. We plan to expand our team and capabilities to fill this role.

On March 15, 2018, the Company formed its’ scientific advisory board, which will assist management in the development of its business plans in the cannabis industry. The initial members of the scientific advisory board will consist of Dr. Ronald Walter, Dr. Nadia Sabeh and Mr. Damian Solomon.

Alamo CBD, LLC Asset Acquisition

On January 3, 2017, the Company signed a binding LOI with Alamo CBD to enter discussions to combine and create a medical cannabinoids pharmaceutical group. On August 3, 2017, we formed Alamo Acquisition Sub, a wholly owned Texas limited liability company.

On August 4, 2017, the Company 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 members of Alamo CBD (the “Alamo Surviving Members”) exchanged their membership interests in Alamo CBD for 7,584,008 shares of Indoor Harvest’s common stock. Alamo CBD continued as our surviving wholly-owned subsidiary and Alamo Acquisition Sub ceased to exist.

In addition to the foregoing, following the closing of the Alamo Acquisition, and Alamo CBD being successfully awarded a provisional or full license to produce and dispense cannabis in the State of Texas, Indoor Harvest will issue to the individual Alamo Surviving Members, an additional Eight Million Five Hundred Thousand Dollars ($8,500,000) of newly-issued shares of common stock of Indoor Harvest, par value $0.001, based upon the three (3) day average closing price of the Company’s common stock, as quoted on the OTCQB, prior to the time of issuance. However, there can be no assurance that Alamo CBD will be awarded such license in the near future or at all.

Additionally, upon Alamo CBD successfully being registered and licensed by the Drug Enforcement Agency (“DEA”) to produce and dispense cannabis under federal law, Indoor Harvest will issue to the individual Alamo Surviving Members, an additional Two Million Five Hundred Thousand Dollars ($2,500,000) cash payment, or newly-issued shares of common stock of Indoor Harvest, par value $0.001, based upon the three (3) day average closing price of the Company’s common stock, as quoted on the OTCQB, prior to the time of issuance, at the option of the individual Alamo Surviving Members. A combination of cash and common stock may be elected by Alamo Surviving Members individually. However, there can be no assurance that Alamo CBD will be registered or licensed by the DEA, in the near future or at all.

On August 8, 2017, Chad Sykes, the Company’s Founder and Chief of Cultivation, returned 2,500,000 shares of common stock to the Company. Mr. Sykes voluntarily returned such shares in order to prevent dilution to the Company’s shareholders as a result of the Alamo Acquisition and in order to facilitate the Alamo Acquisition. The return of common stock by Chad Sykes was a non-cash transaction and reduced the common stock outstanding as of December 31, 2017. The cancellation of shares was not applied to the acquisition of assets from Alamo CBD. Therefore, there was a $1,440,961 impairment loss of intangible assets

On September 6, 2017, the Company issued an aggregate of 7,584,008 shares of common stock to the members of Alamo CBD related to the Alamo Acquisition.

Contractual Joint Venture with Alamo CBD and Vyripharm Enterprises, LLC

On March 23, 2017, Indoor Harvest entered into a Contractual Joint Venture Agreement (the “Vyripharm Joint Venture Agreement”) by and between Vyripharm Enterprises, LLC (“Vyripharm”) and Alamo CBD, pursuant to which the parties agreed to participate in an unincorporated joint venture (the “Joint Venture”) for the following business purposes:

●

The parties would work together to enhance the ability of Alamo CBD to apply for and obtain licensure, or a permit, to grow and/or dispense marijuana products for medical and/or consumer use, as the case may be:

	i.	In Texas, pursuant to the Texas Compassionate Use Act, as may be amended;

	ii.	In Colorado, pursuant to recent Colorado legislation permitting foreign ownership of entities that grow and/or dispense marijuana products for medical and/or consumer use; and

	iii.	Pursuant to recent United States Drug Enforcement Administration regulations which expand the opportunities for entities providing research involving marijuana and its chemical constituents, as referenced in 21 U.S.C. 822(a)(1) and 21 U.S.C. 823(a), et. seq.

●

To establish Alamo CBD as a supplier of a variety of medical use cannabis oil to Vyripharm for Vyripharm’s use in conducting research and development to create novel pharmaceutical and radiopharmaceutical compounds designed to image and treat certain debilitating diseases including, but not limited to epilepsy, post-traumatic stress disorder, Alzheimer’s, ALS, and other neurodegenerative diseases; and to establish Indoor Harvest as the project developer and engineering, procurement and construction group, in which Indoor Harvest is responsible for costs and efforts related to Alamo CBD’s efforts to become licensed under the Texas Compassionate Use Act and to meet its obligations under this Joint Venture agreement.

The Company paid an initial down payment of $250,000 under the Joint Venture Agreement on March 30, 2017.

As published in the Texas Department of Public Safety (“DPS”) Self-Evaluation Report, on page 543, question (D), dated September 29, 2017, the DPS originally interpreted the statute as requiring a market-based system by which the number and location of licensees are determined by market factors rather than by regulation – as not mandating or limiting the number of licensed distributors. It was originally understood that the applicants would be required to satisfy certain basic requirements prior to licensure, and the ability to maintain compliance with DPS guidelines will be evaluated through on-going audits and inspections.

In late 2016, the DPS modified its approach to restrict the number of licenses to three. This necessitated the development of a competitive review process, where three applicants were conditionally approved based on the review of the submitted application materials. Upon successful onsite inspection of their facilities, qualified applicants will be issued licenses. Because of this competitive review process, the Joint Venture group placed 16th out of 43 applicants and its application is currently considered pending by the DPS.

On June 30, 2017, the Company, Alamo CBD and Vyripharm entered into discussions to amend and extend the payment terms under the Joint Venture Agreement due to the group not being awarded one of the three initial provisional licenses to produce cannabis in Texas under the TCUP.

On August 7, 2017, after negotiations, the Company advised Vyripharm that it intended to voluntarily default on the Joint Venture Agreement and the Company wrote off the $250,000 down payment towards the Joint Venture investment and there is no further obligation by either party under the terms of the Joint Venture. The Company’s management determined that without a license to produce cannabis, the Company would not be able to fully utilize the intent of the Joint Venture partnership and the Company would be financially burdened by the ongoing Joint Venture terms. Both parties agreed that this decision would not impair either party’s ability to pursue a Joint Venture in the future, after the Company, or Alamo CBD, obtained license to produce cannabis. Should the Company voluntarily default on the Joint Venture, the agreement would terminate and neither party would have further obligation to the other.

Other Agreements

On October 11, 2017, we entered into a binding letter of intent (the “Zoned Properties LOI”) with Zoned Properties Inc (“Zoned Properties”), outlining three pending independent agreements to complete research and development projects for licensed medical cannabis facilities to be located in Tempe, Arizona, Parachute, Colorado and Stockdale, Texas or other location to be determined after approval of a provisional license under the TCUP. If the three independent agreements were not agreed upon prior to January 9, 2018, the Zoned Properties LOI would have automatically terminated. The parties extended the term of the LOI in January 2018.

The extension expired in April 2018 resulting in the Zoned Properties LOI being terminated and the parties having no further obligation to one another. We made total non-refundable payments of $50,000 to Zoned Properties.

Research and Development

MIT CityFarm (MIT OPenAg)

On September 18, 2013, the Company entered into a Letter Agreement (the “MIT Letter Agreement”) for the Transfer of Materials with the Massachusetts Institute of Technology (“MIT”). Pursuant to the MIT Letter Agreement, the Company was to provide MIT with an aeroponic system components and fixtures manufactured by Indoor Harvest for the purpose of developing a wall facade aeroponic and hydroponic system, also known as the “Food Server”, as part of MIT’s Media Lab “Changing Places” project (“MIT CityFarm”). Indoor Harvest was responsible for providing technical assistance and materials as a “Technical Systems Adviser”. Per the Company’s role as a Technical Systems Adviser, the Company was exposed to research that showed the potential for using aeroponics, LED lighting, controlled environments and sensor technologies in the development of environmental and climate recipes to achieve a specific phenotypic response of cultivars.

On March 14, 2017, the Company ceased all support for the MIT CityFarm project, due to decisions by MIT CityFarm principals, in which the terms of the MIT Letter Agreement were not honored due to concerns over the Company’s involvement with cannabis. The MIT Letter Agreement required the acknowledgement by MIT CityFarm of the use of any source materials, such as the Company’s aeroponic designs, in any publications reporting its use.

Below are pictures of the Company’s installation of aeroponic and hydroponic systems at MITCityFarm:

Canopy Growth Cannabis Pilot

Based on knowledge gained while working with MIT CityFarm, the Company saw a business opportunity to use the Company’s technology and methods within the cannabis industry. On December 18, 2014, the Company entered into a Cannabis Production Pilot Agreement (the “Canopy Cannabis Pilot”) with Canopy Growth Corporation (formerly Tweed Marijuana Inc.), a Canadian company (“Canopy Growth”). Canopy Growth is a Toronto Stock Exchange listed company. Its wholly owned subsidiaries, Tweed Inc., Tweed Farms Inc. (formerly Prime1 Construction Services Corp.), Bedrocan Canada and Spectrum Cannabis, are licensed producers of medical cannabis in Canada. The principal activities of Canopy Growth are the production and sale of cannabis through its wholly owned subsidiaries as regulated by the Marihuana for Medical Purposes Regulations. The Canopy Cannabis Pilot was broken into two separate phases, as follows:

	●	During Phase One, tests were conducted using prototypes provided by Indoor Harvest. The purpose of Phase One was to test the initial design and evaluate the root mass development of various strains of cannabis chosen by Canopy Growth. Two trials were conducted during Phase One. Phase One recorded the growth rate, phytocannabinoid production, water usage, fertilizer usage and labor using the aeroponics systems provided by Indoor Harvest.

	●	During Phase Two, Canopy Growth was given the option to request Design Build services to be provided by Indoor Harvest. Indoor Harvest provided these services free of charge and provided projected costs associated with the manufacture and installation of new aeroponic designs (“New IP”). Canopy Growth was then provided the option to purchase equipment from Indoor Harvest based on these projected costs.

Phase One Cannabis Pilot

Trial 1: Strain Ghost Train Haze

In March 2015, we began the first trial under the Canopy Cannabis Pilot. A Cannabis Sativa dominant strain, Ghost Train Haze, was selected and 8 plants were grown in a 64-cubic foot root chamber HPA Table prototype using a “Screen of Green” cultivation method, in which plants are cropped and trained to produce a higher yield from a single plant. The initial Canopy Cannabis Pilot utilized 1040 watts of illumitex® brand LED lighting using the F3 Spectrum and 2,000 watts of Mogul based HPS lighting. The system was operated drain to waste, in which no water was recirculated or recaptured. The following results were recorded under the initial Cannabis Pilot.

	●	An increase of up to 91% in average dry yield under HPS lighting when compared to the existing average.

	●	An increase of up to 71% in average dry yield under LED lighting when compared to the existing average.

	●	An increase of up to 117% in liters of water per day/plant under HPS lighting.

	●	An increase of up to 183% in liters of water per day/plant under LED lighting.

	●	A decrease of up to 21% in nutrient use under HPS lighting and no change under LED lighting.

Trial 2: Strain UK Cheese

In December 2015, we began a second trial under our Canopy Cannabis Pilot with Canopy Growth and similar results were achieved confirming the initial trial results. The second trial utilized an increased plant count of 20 plants per HPA Table prototype and the strain selected was UK Cheese, a Cannabis Sativa and Cannabis Indica hybrid. The second trial also tested root mass differences between a prototype 64 cubic foot and a 32-cubic foot root chamber. The second trial utilized 1040 watts of illumitex® brand LED lighting using the X5 Spectrum and 2,000 watts of Double Ended based HPS lighting and used a “Screen of Green” cultivation method. The following results from the second trial were recorded:

	●	An increase of up to 86% in average dry yield under HPS lighting when compare to the existing average.

	●	An increase of up to 25% in average dry yield under LED lighting when compared to the existing average.

	●	An increase of up to 89% in liters of water per day/plant under HPS lighting.

	●	An increase of up to 70% in liters of water per day/plant under LED lighting.

	●	A decrease of up to 69% in nutrient use under HPS lighting and 72% decrease under LED lighting.

Trial 1 and 2 Summary

Indoor Harvest provided minimal instructional input during both trials. The Company believes the results of the Cannabis Pilot show the potential for the Company’s technology and that without any significant instructional support, operators can achieve significant gains in yield and reductions in costs. There was a noticeable difference recorded in the morphology of the Cannabis strains tested utilizing the Company’s aeroponic platforms over the baseline using drip irrigation and a coco medium. During the first trial, the strain tested showed a significant increase in the size of the plants fan leaves over the baseline methods leading to a potential increase of up to 150% in produced biomass.

The aeroponic systems provided showed a significant increase in growth rate during the vegetative stage, as compared to baseline methods. Additionally, there were noticeable differences in the development of roots under certain conditions and difference we’re recorded in phenotypic response. The results of both trials showed an ability to provide greater control over the root environment, provided an ability to monitor nutrient uptake, provided an increase in yield, showed a dramatic decrease in nutrient use and provided an ability to prevent contamination by eliminating mediums. The Company believes that with further development of additional automation, integration of LED, HVAC and controls that we can continue to improve on the performance of the Company’s technology and methods. All trials were conducted using primarily a drain to waste configuration in which system runoff was not recaptured or recycled.

Phase Two Cannabis Pilot

On July 6, 2016, we entered into Phase Two of our Canopy Cannabis Pilot with Canopy Growth Corporation and signed a design-build, DBEPC, cost plus contract with Tweed, a subsidiary of Canopy Growth, to construct a high Pressure Aeroponic production system.

On May 31, 2017, the Company notified Canopy Growth that it had completed the majority of work under Phase Two of its Cannabis Pilot. The Company installed 13 HPA Table systems and 1 custom built Nutrient Pump Skid at Canopy Growth for an internal economic pilot. The Company submitted proposals to Canopy Growth for three designs for potential New IP development under the Canopy Cannabis Pilot. Canopy Growth did not pursue these proposals and chose to integrate the Company’s HPA Table fixtures and a custom-built Nutrient Pump Skid into previously existing facility fertigation and mechanical systems at Canopy Growth. This integration further proved the Company’s fixture-based design allowing for custom installations based on an operator’s specifications. Canopy Growth has ongoing rights to purchase additional equipment from Indoor Harvest through a fixed cost plus agreement but is under no obligation to do so. The Phase Two Cannabis Pilot expired December 18, 2017.

Our Current Portfolio of Product Designs

The Company has developed and maintains proprietary high pressure aeroponic cultivation system designs as well as flood and drain and floating raft designs, for cannabis and other agriculture products. Below is a brief description of the Company’s products.

The Indoor Harvest® Modular HP-Aeroponics Platform

The system comprises of seven primary fixture components that consist of an Aeroponic Growth Tray (“AGT”), Aeroponic Growth Lid (“AGL”), Aeroponic Spray Manifold (“ASM”), Aeroponic Pressure Manifold (“APM”), Nutrient Delivery System (“NDS”), Water Reclamation and Recirculation System, and Lift Station. The combination of an AGT, AGL and ASM is known as an “HPA Table”. The combination of an APM and NDS is known as a “Nutrient Pump Skid”. Each of these individual modular fixtures are combined to create custom configurations suitable for any form of indoor growing environment.

Initially designed to produce leafy greens, micro-greens, fruiting plants and herbs, our fixtures can be easily adapted for a variety of other uses, such as horticultural research, medicinal plant production, plant cloning and hardwood propagation. A smaller version of our basic design was utilized at MITCityFarm and our larger system has been independently tested by Canopy Growth Corporation. The results of these and the Company’s own internal trials has shown the following benefits over a more traditional hydroponic system:

		● Up to a 95% reduction in water usage
		● Up to a 70% reduction in fertilizers
		● Accelerated growth rate
		● Increased plant biomass
		● Increased phytochemical content
		● Elimination of growing mediums
		● Sterile production

Below are pictures of the Company’s HPA Table’s and Nutrient Pump Skid being installed at Tweed Marijuana, Inc., a subsidiary of Canopy Growth Corporation:

The Indoor Harvest® Low Tide VFRack™ Platform

The Low Tide VFRack platform is an easy to install, commercial quality vertical farming system designed to produce microgreens, leafy greens and herbs. Each Low Tide VFRack™ System comes standard with 4 levels offering up to 128 sq. ft. of production or can support up to 18 individual 10”X20” trays per layer.

The system uses Botanicare 4ft X 8ft ID Low Tide Grow Trays and a 115 gallon or larger reservoir. Each unit comes complete with all pumps, plumbing, LED lighting and is ready to grow, just add plants and nutrients. The modular nature of the system allows for easy expansion. The Low Tide VFRack system is designed specifically for flood and drain operation and provides the following benefits:

		● Integrated LED lighting
		● Open slot face to accommodate unlevel floors
		● Plug and play installation
		● Reduced installation costs
		● Unistrut based platform

Below are pictures of the Company’s Low Tide VFRack platform that were installed at Moon Flowers Farms.

The Indoor Harvest® Shallow Raft VFRack™ Platform

The Shallow Raft VFRack™ platform is an easy to install, commercial quality, shallow raft vertical farming system. Each Shallow Raft VFRack™ System comes standard with three levels, offering 216, 336, 432 and 864 plant sites. The system uses Botanicare 4ft X 8ft ID Grow Trays, 115 gallon or larger reservoir and 2ft X 4ft rafts and is designed for the production of leafy greens and herbs.

Each unit comes complete with all pumps, plumbing, LED lighting and is ready to grow, just add plants and nutrients. The modular nature of the system allows for easy expansion.

The Shallow Raft VFRack system is designed specifically for floating raft operation and provides the following benefits:

		● Integrated LED lighting
		● Open slot face to accommodate unlevel floors
		● Plug and play installation
		● Reduced installation costs
		● Unistrut based platform

Below are pictures of the Company’s Shallow Raft VFRack:

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 plan of expanded operations for the next 12 months, assuming we secure the necessary funding, is stated herein. In summary, we plan to grow the Company through acquisitions, joint ventures and other relationships.

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 2019, once we have our new plans funded.

Competition and Market Position

We are taking a two-pronged approach to creating shareholder value for Indoor Harvest.

We will continue to look for opportunities to deploy some aspect of our aeroponic cultivation technology in an R&D setting to complete development and commercialization. Additionally, we have an opportunity to leverage our public company as a consolidation vehicle with other synergistic and like-minded companies in the Cannabis industry. This may be done by asset acquisitions, mergers, ventures or other methods.

OTC Markets

OTC Markets offer small companies almost all the 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 May 31, 2019, we have 2 part-time employees and a variety of advisors and consultants.

Governmental Regulation and Certification

Except as set forth below, we are not aware of any material governmental regulations or approvals for any of our products or services.

As the possession and use of cannabis is illegal under the CSA, we could be deemed to be aiding and abetting illegal activities through the equipment we intend to sell, lease and license in the U.S. to grow cannabis. Additionally, we would be violating federal law should we begin to manufacture and dispense cannabis under the TCUP. Under federal law, and more specifically the CSA, the possession, use, cultivation, and transfer of cannabis is illegal. Our equipment could be used by persons or entities engaged in the business of possession, use, cultivation, and/or transfer of cannabis. As a result, law enforcement authorities, in their attempt to regulate the illegal use of cannabis, could seek to bring an action or actions against us, including, but not limited, to a claim of aiding and abetting another’s criminal activities or directly violating federal law by manufacturing or distributing cannabis. The federal aiding and abetting statute provides that anyone who “commits an offense against the United States or aids, abets, counsels, commands, induces or procures its commission, is punishable as a principal.” However, we do not believe that our plans to license and sell technology as described herein violates federal law and we believe that we would prevail if any such action were brought against us although there can be no assurance of this.

Cannabis is a Schedule-I controlled substance and is illegal under federal law. Even in such states that have legalized the use of cannabis, its use remains a violation of federal law. Since federal law criminalizing the use of cannabis preempts state laws that legalize its use, strict enforcement of federal law regarding cannabis would likely result in our inability to proceed with our business plan, notably with respect to our plans for cannabis cultivation, production and research. In addition, our assets, including real property, cash, equipment and other goods, could be subject to asset forfeiture because cannabis is still illegal at the federal level should we begin to manufacture and distribute cannabis under the TCUP.

In February 2017, the Trump administration made announcements that there could be “greater enforcement” of federal laws regarding cannabis. To this end, on January 4, 2018, the DOJ suspended certain Obama era protections set forth previously in the Cole Memo, as such term is defined above, which was replaced with a new Memorandum titled with the subject “Marijuana Enforcement” from Attorney General Jeff Sessions which provides that each U.S. Attorney has the discretion to determine which types of cannabis-related cases should be federally prosecuted, thus ending the broad safe harbor provided under the Cole Memo. Any such enforcement actions could have a material adverse effect on our business and results of operations. In November 2018, Attorney General Sessions resigned and left the DOJ. As a nominee, Attorney General William Barr testified before the U.S. Senate and wrote to Congress that, as Attorney General, he would not seek to prosecute cannabis companies that relied on the Cole Memo and are complying with state law. The Company plans to continue to follow and monitor the actions and statements of the Trump administration, the DOJ and Congress’ positions on federal law and cannabis policy.

This area is in flux and our disclosure should not be deemed a legal opinion or fully addressing the multi-state and Federal government areas.

Emerging Growth Company Status

We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We intend to take advantage of all of these exemptions.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, and delay compliance with new or revised accounting standards until those standards are applicable to private companies. We have elected to take advantage of the benefits of this extended transition period.

We could be an emerging growth company until the last day of the first fiscal year following the fifth anniversary of our first common equity offering, although circumstances could cause us to lose that status earlier if our annual revenues exceed $1.0 billion, if we issue more than $1.0 billion in non-convertible debt in any three-year period or if we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.

Additional Information

We are a public company and file annual, quarterly and special reports and other information with the SEC. We are not required to, and do not intend to, deliver an annual report to security holders. Our filings are available, at no charge, to the public at http://www.sec.gov .

ITEM 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are not required to provide the information under this item.

ITEM 1B. Unresolved Staff Comments.

Smaller reporting companies are not required to provide the information required by this item.

Item 2. Properties.

Our Offices

Our headquarters are pending.

Item 3. Legal Proceedings.

From time to time, we 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. We are not a party to any material current, pending or threatened litigation.

Item 4. Mine Safety Disclosures.

None.

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 OTCQB under the symbol “INQD”. As of May 31, 2019, we had 43,730,188 outstanding shares of common stock and approximately 112 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.

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 May 31, 2019, we had 43,730,188 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 stock holders 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 112 record holders of our common stock, as of May 31, 2019.

Preferred Stock

As of May 31, 2019, we had 750,000 shares of Series A Preferred Convertible Stock issued and outstanding.

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

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 April 24, 2019 is $0.02275.

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.

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, 2018.

Options

There are no outstanding options to purchase our securities.

Recent Sales of Unregistered Securities

During the year ended December 31, 2018, 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 Report on Form 10-Q as follows:

We relied upon Section 4(a)(2) of the Securities Act of 1933, as amended for the above issuances to U.S. citizens or residents. We believe that Section 4(a)(2) of the Securities Act of 1933 was available because:

	●	None of these issuances involved underwriters, underwriting discounts or commissions.

	●	Restrictive legends were and will be placed on all certificates issued as described above.

	●	The distribution did not involve general solicitation or advertising.

	●	The distributions were made only to investors who were sophisticated enough to evaluate the risks of the investment.

In connection with the above transactions, although some of the investors may have also been accredited, we provided the following to all investors:

	●	Access to all our books and records.

	●	Access to documents relating to our operations.

	●	The opportunity to obtain any additional information, including information relating to all of our agreements with third parties which were only oral and not written, to the extent we possessed such information, and including all information necessary to verify the accuracy of the information to which the investors were given access.

Prospective investors were invited to review at our offices at any reasonable hour, after reasonable advance notice, any materials available to us concerning our business. Prospective Investors were also invited to visit our offices.

Item 6. Selected Financial Data.

Not required.

Item 7. Management’s Discussion and Analysis Of Financial Condition and Results Of Operations.

The discussion of our financial condition and results of operations and business and related within this document should be read in conjunction with our financial statements and the related notes, and other financial information included in this filing. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Forward-Looking Statements

The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and the related notes, and other financial information included in this filing.

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national, and local general economic and market conditions; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; change in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; the risk of foreign currency exchange rate; and other risks that might be detailed from time to time in our filings with the Securities and Exchange Commission.

You are urged to carefully review and consider the various disclosures made by us in this report and in our other reports as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

Overview

Indoor Harvest, through its brand name Indoor Harvest®, is focused on leveraging its investment and experience in Vertical Farming, Building Integrated Agriculture, Controlled Environment Agriculture and Aeroponic Cultivation technology with other synergistic enterprises in the Cannabis industry as part of an M&A/consolidation and integration strategy.

The company spent the majority of 2018 reorganizing, restructuring and repositioning.

During the fiscal year of 2018, after an unsuccessful S-1 funding effort, and the inability to fund previous plans, the Company decided to move its center of focus and attention to the Boston, MA, market.

We are currently funded by Tangiers Global, LLC through a convertible note structure that allows the Company to keep being active while we restructure, reposition and recapitalize the company.

As part of a restructuring and recapitalization effort the Company will be holding a Special Meeting of Stockholders (currently scheduled for June 7, 2019) to increase the number of shares of common stock the Company is authorized to issue from fifty million to two hundred million. We believe this will enable the Company to raise additional capital and attract talent.

Raising new capital is critical to the Company going forward. We are working on our new investor deck and business plan to take to market mid-2019.

Working on building our team and market position in Massachusetts and beyond, as opportunities present themselves. We are networking and meeting with major cultivation operations and vertically integrated companies around the state along with researchers, technologists and politicians.

We are positioning the Company more as an integration and consolidation platform offering other cannabis companies the opportunity to be part of a bigger play, sharing intellectual capital, technology, access to new capital markets and liquidity for investors. Our focus will be on aggregating and integrating early stage cannabis companies focused on Genetics, Tissue Culture, Controlled Environment Ag technologies, including high pressure Aeroponic Cultivation, Cultivation operations, robotics and AI.

We are moving our base of operation to the Boston, MA, area where we believe we can leverage that region’s unique position in the cannabis, bio tech and bio Ag industries, alongside academic institutions like MIT and Harvard.

At the same time, we plan to continue to look for partners and opportunities to continue to refine the development and commercialization of our Aeroponic Cultivation technology designs.

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.

Our operational expenditures are primarily related to developing our technology, sources and methods, developing research partnerships and collaborations and the costs related to being a fully reporting company with the SEC.

Current Activities

We are working to leverage our technology with other industry companies to try and do joint ventures or acquisitions.

Results of Operations

Year ended December 31, 2018 compared to year ended December 31, 2017

The following table presents our operating results for the year ended December 31, 2018 compared to December 31, 2018:

	Year Ended
	December 31,
	2018			2017			Change			%
Revenue	$	-		$	-		$	-			-
Operating expenses
Depreciation and amortization expense		12,063			51,507			(39,444	)		(77	%)
Research and development		-			1,625			(1,625	)		(100	%)
Loss on investment in joint venture		-			250,000			(250,000	)		(100	%)
Impairment loss		-			1,440,961			(1,440,961	)		(100	%)
Professional fees		350,839			418,092			(67,253	)		(16	%)
General and administrative expenses		729,482			1,061,493			(332,011	)		(31	%)
Total operating expenses		1,092,384			3,223,678			(2,131,294	)		(66	%)
Loss from operations		(1,092,384	)		(3,223,678	)		2,131,294			(66	%)
Other expense
Other income (expense)		-			7,196			(7,196	)		(100	%)
Loss on investment in joint venture		-			250,000			(250,000	)		(100	%)
Interest expense		(100,504	)		(163,047	)		62,543			(38	%)
Amortization of debt discount		(145,530	)		(515,814	)		370,284			(72	%)
Change in fair value of embedded derivative liability		(1,973,500	)		(442,957	)		(1,530,543	)		346	%
Total other income (expense)		(2,219,534	)		(1,188,372	)		(1,031,162	)		87	%

Net loss	$	(3,311,918	)	$	(4,412,050	)	$	1,100,132			(25	%)

Revenues

During the year ended December 31, 2018 and December 31, 2017, the Company generated no revenue.

Operating Expenses

Total operating expenses for the year ended December 31, 2018 and 2017 were $1,092,384 and $3,223,678, respectively, for an aggregate decrease of 2,131,294 or 66%. The aggregate decrease is primarily related to the impairment loss of intangible assets of $1,440,961, or 100%, the loss on the investment in joint venture of $250,000, or 100%, a decrease in professional fees of $67,253 or 16% associated with the TCUP application as well as the Alamo CBD merger and a decrease in general and administrative expenses of $332,011 or 31% associated with stock based compensation.

Other Expense

Total other expense for the year ended December 31, 2018 and 2017 were $2,219,534 and $1,188,372, respectively, for an increase of $1,031,162 or 87%. The increase is primarily related to the change in the fair value of the embedded derivative liability of $1,530,543 related to the Tangiers convertible notes payable offset by loss on investment in joint venture incurred in 2017 and a decrease in amortization of debt discount.

Net Loss

As a result of the factors discussed above, net loss for the year ended December 31, 2018 and 2017 was $3,311,918 and $4,412,050, respectively, for a decrease of $1,100,132 or 25%.

Liquidity and Capital Resources

The following table provides selected financial data about our Company as of December 31, 2018 and December 31, 2017, respectively.

Working Capital

	December 31, 2018			December 31, 2017			Change			%
Current assets	$	186,652		$	89,905		$	96,747			108	%
Current liabilities	$	2,578,975		$	1,119,821		$	1,459,154			130	%
Working capital deficiency	$	(2,392,323	)	$	(1,029,916	)	$	(1,362,407	)		132	%

Cash Flows

	Year Ended
	December 31,
	2018			2017			Change
Cash used in operating activities	$	(680,753	)	$	(1,019,729	)	$	338,976
Cash used in investing activities	$	-		$	(239,750	)	$	239,750
Cash provided by financing activities	$	800,982		$	1,216,713		$	(415,731	)
Net Change in Cash During Period	$	120,229		$	(42,766	)	$	162,995

As at December 31, 2018, our Company’s cash balance was $155,682 and total assets were $205,104. As at December 31, 2017, our Company’s cash balance was $35,453 and total assets were $133,020.

As at December 31, 2018, our Company had total liabilities of $2,583,468, compared with total liabilities of $1,132,644 as at December 31, 2017.

As at December 31, 2018, our Company had a working capital deficiency of $2,392,323 compared with a working capital deficiency of $1,029,916 as at December 31, 2017. The increase in working capital deficiency was primarily attributed to an increase in convertible notes payable, accounts payable and derivative liabilities.

Cash Flow from Operating Activities

Net cash used in operating activities for the year ended December 31, 2018 and 2017 were $680,753 and $1,019,729, respectively, for a decrease of $338,976. 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

Net cash used in investing activities for the year ended December 31, 2018 and 2017 were $0 and $239,750, respectively, for a decrease of $237,750. The decrease is primarily due to the investment in the Vyripharm joint venture of $250,000.

Cash Flow from Financing Activities

Net cash provided by financing activities for the year ended December 31, 2018 and 2017 were $800,982 and $1,216,713, respectively, for a decrease of $415,731. During the year December 31, 2018, we received $808,500 by way of loan under a convertible note payable and repaid note payable of $7,518. During the year ended December 31, 2017, we received $500,000 by way of loan under a convertible note payable, $824,000 from issuance of common stock, $300,000 from issuance of preferred stock and repaid note payable of $6,787, convertible note of $175,000 and settlement of demand note payable of $225,500

Investing Activities

Chuck Rifici Holdings Note for $204,000

On September 26, 2016, we entered into a promissory note and warrant purchase agreement with Chuck Rifici Holdings, Inc., a Canadian Corporation. The note consisted of $225,500 in aggregate principal amount including $204,000 actual payment of purchase price plus a 10% original issue discount. The warrant purchase agreement consisted of an aggregate total of 250,000 common stock warrants to purchase common stock for $0.30 for a period of 12 months, to the buyer, in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended and/or Regulation S of the Securities Act of 1933, as amended for the above issuances to non-US citizens or residents.

On March 20, 2017, the Company settled $269,498 in principal and interest, plus 115% multiplied by the principal amount of $225,500 plus accrued interest of $8,846 on the principal amount of a promissory note with Chuck Rifici Holdings, Inc. originally dated September 26, 2016. The Company settled the amount owed by paying $269,498 in cash. The Company was released from any further liability under this Rifici Note upon payment of this amount.

FirstFire October Note for $125,000

On October 19, 2016, the Company entered into a securities purchase agreement with FirstFire relating to the issuance and sale of a promissory note of $137,500 in aggregate principal amount including $125,000 actual payment of purchase price plus a 10% original issue discount.

On March 20, 2017, the Company settled $177,604 in principal and interest, plus 125% multiplied by the principal amount of $137,500 plus accrued interest of $4,583 on the principal amount of a promissory note with FirstFire originally dated October 19, 2016. The Company settled the amount owed by paying $77,604 in cash and by issuing 333,333 shares of common stock at the fixed conversion price of $0.30 per share for a total value of $100,000. The Company was released from any further liability under the FirstFire note upon delivery of these amounts of cash and stock.

FirstFire December Note for $125,000

On December 14, 2016, the Company entered into a securities purchase agreement with FirstFire relating to the issuance and sale of a promissory note of $137,500 in aggregate principal amount including $125,000 actual payment of purchase price plus a 10% original issue discount.

On March 20, 2017, the Company settled $175,313 in principal and interest, plus 125% multiplied by the principal amount of $137,500 plus accrued interest of $2,750 on the principal amount of a promissory note with FirstFire originally dated December 14, 2016. The Company settled the amount owed by paying $175,313 in cash. The Company was released from any further liability under this FirstFire Note upon payment of this amount.

Rule 506(b) Private Stock Offering

From February 22, 2017 through March 15, 2017, the Company sold, in reliance upon Regulation D Rule 506, a total of 2,060,000 shares of common stock to 17 U.S. accredited investors at $0.40 per share for cash totaling $824,000.

Tangiers Promissory Notes

The Company has issued the following promissory notes to Tangiers:

	●	“Note 1”: $550,000 Promissory Note dated March 22, 2017 and amendment thereto dated October 10, 2017.
	●	“Note 2”: $50,000 Promissory Note dated October 12, 2017.
	●	“Note 3”: $550,000 Promissory Note dated January 16, 2018 and amendment thereto dated February 13, 2018.

As of December 31, 2017, the balance under Note 1 is $519,000, which includes $44,000 guaranteed interest. As of December 31, 2017, Note 1 can be converted into 3,280,255 shares of the Company’s common stock.

On January 9, 2018, the Company issued 899,685 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $100,000 of Note 1 at a conversion price of $0.11. On March 5, 2018, the Company issued 269,716 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $25,000 of Note 1 at a conversion price of $0.09. On March 21, 2018, the Company issued 295,631 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $25,000 of Note 1 at a conversion price of $0.08. On April 10, 2018, the Company issued 307,692 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $20,000 of Note 1 at a conversion price of $0.07.

As of April 17, 2018, the balance under Note 1 is $349,000, which includes $44,000 guaranteed interest. As of April 17, 2018, Note 1 can be converted into 1,378,205 shares of the Company’s common stock.

The Company issued a fixed convertible promissory note to Tangiers for the principal sum of $50,000 as a commitment fee. The promissory note 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. Upon a “Maturity Default,” which is defined in Note 2 as the event in which Note 2 is not retied 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. As of December 31, 2017, the balance under Note 2 is $55,000, which includes $5,000 guaranteed interest. As of December 31, 2017, Note 2 can be converted into 300,120 shares of the Company’s common stock.

Note 3 is convertible into shares of the Company’s common stock at a conversion price of $0.30 per share. However, if Note 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. As of April 17, 2018, the balance under Note 3 is $231,660, which includes $17,160 guaranteed interest. As of April 17, 2018, Note 3 can be converted into 650,000 shares of the Company’s common stock.

Note 1 has a maturity date of April 10, 2018 and Note 2 has a maturity date of May 12, 2018. Note 3 had a maturity date of July 16, 2018.

Further, the amount of shares issuable upon conversion stated above are estimates only and any conversion of Note 1 or Note 2 or Note 3, by Tangiers is in solely at its discretion and the notes may never be converted, and further if a conversion does occur, the timing of such conversion would affect the potential number of common stock shares issued upon any such conversion based on the outstanding note amount and applicable conversion price at the time of any such conversion.

The execution of the amendment to Note 1 on October 10, 2017 caused the Company to default on the first draw due under Note 1 due to the acceleration of the maturity date. The default allows Tangiers to demand payment in cash equal to 150% of the outstanding principal and interest, which is automatically added to the outstanding principle, and convert all or a portion of the outstanding principal into shares of common stock of the Company. The default conversion rate of Note 1 is now the lower of the conversion rate then in effect or 65% of the lowest trading price for the 15 days prior to Tangiers’ notice of conversion. As of March 13, 2018, Tangiers has informed the Company that they have elected at this time not to enforce the default interest rate under Note 1 and also not to enforce the fees, reserving its rights to enforce the foregoing in their discretion. Other than the foregoing, none of the above listed notes are currently in default.

Investment Agreement with Tangiers

On October 12, 2017, we entered into an Investment Agreement (the “Tangiers Investment Agreement”) with Tangiers Global, LLC (“Tangiers”). Pursuant to the terms of the Tangiers Investment Agreement, Tangiers committed to purchase up to $2,000,000 of our common stock over a period of up to 36 months. From time to time during the 36-month period commencing from the effectiveness of the registration statement, we may deliver a put notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice. The maximum investment amount per notice must be no more than 200% of the average daily trading dollar volume of our common stock for the eight (8) consecutive trading days immediately prior to date of the applicable put notice and such amount must not exceed an accumulative amount of $250,000. The minimum put amount is $5,000. The purchase price per share to be paid by Tangiers will be the 80% of the of the average of the two lowest closing bid prices of the common stock during the pricing period applicable to the put notice, provided, however, an additional 10% will be added to the discount of each put if (i) we are not DWAC eligible and (ii) an additional 15% will be added to the discount of each put if we are under DTC “chill” status on the applicable date of the put notice.

In connection with the Tangiers Investment Agreement with Tangiers, we also entered into a Registration Rights Agreement with Tangiers, pursuant to which we agreed to use our best efforts to, within 45 days of October 12, 2017, file with the SEC a registration statement, covering the resale of 5,000,000 shares of our common stock underlying the Investment Agreement with Tangiers.

Meeting Cash Requirements

The ability to fund our Operational Activities is contingent upon us obtaining additional financing. If we don’t obtain the anticipated funds from our sources of funding beyond those needed for current operational activities, we may be able to finance our additional planned operations and continue growing our business.

We cannot guarantee we will be successful in our business operations, both current and potential future operations as described above.

We cannot guarantee that we will have sufficient financial resources to fund current operational activities and additional planned operational activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including the financial risks associated with the limited capital resources currently available to us for the implementation of our business strategies. To become profitable and competitive, we must continue to execute our business plan as described above.

We have an accumulated deficit and have incurred operating losses since our inception and expect losses to continue during 2019. Our auditor has indicated in their Report that these conditions raise substantial doubt about our ability to continue as a going concern.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

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.

INDOOR HARVEST CORP

CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

	Page
Consolidated Balance Sheets as of December 31, 2018 and 2017	F-1

Consolidated Statements of Operations for the Years Ended December 31, 2018 and 2017	F-2

Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2018 and 2017	F-3

Consolidated Statements of Cash Flow for the Years Ended December 31, 2018 and 2017	F-4

Notes to the Consolidated Financial Statements	F-5

INDOOR HARVEST CORP

CONSOLIDATED BALANCE SHEETS

	December 31, 2018			December 31, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	155,682		$	35,453
Prepaid expenses		18,370			4,452
Unused commitment fee		-			50,000
Security deposit - short term		12,600			-
Total Current Assets		186,652			89,905

Furniture and equipment, net		14,250			24,623
Security deposit		-			12,600
Intangible asset, net		4,202			5,892
TOTAL ASSETS	$	205,104		$	133,020

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued expenses	$	213,218		$	89,033
Accrued payroll		3,722			6,653
Deferred rent		1,826			6,239
Convertible notes payable, net of debt discount of $22,311 and $69,541, respectively		950,766			455,459
Derivative liability		1,401,111			554,917
Note payable - current portion		8,332			7,520
Total Current Liabilities		2,578,975			1,119,821

Long Term Liabilities:
Note payable		4,493			12,823
Total Liabilities		2,583,468			1,132,644

Stockholders’ Deficit
Preferred stock: 5,000,000 authorized; $0.01 par value Series A Convertible Preferred stock: 5,000,000 designated, 750,000 shares issued and outstanding at December 31, 2018 and 2017		7,500			7,500
Common stock: 50,000,000 authorized; $0.001 par value 34,888,415 and 25,503,678 shares issued and outstanding at December 31, 2018 and 2017, respectively		34,888			25,502
Additional paid in capital		9,299,988			7,376,196
Accumulated deficit		(11,720,740	)		(8,408,822	)
Total Stockholders’ Deficit		(2,378,364	)		(999,624	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	205,104		$	133,020

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements

F- 1

INDOOR HARVEST CORP

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended
	December 31,
	2018			2017

Revenue	$	-		$	-

Operating Expenses
Depreciation and amortization		12,063			51,507
Research and development		-			1,625
Loss on investment in joint venture		-			250,000
Impairment loss		-			1,440,961
Professional fees		350,839			418,092
General and administrative		729,482			1,061,493
Total Operating Expenses		1,092,384			3,223,678

Loss from operations		(1,092,384	)		(3,223,678	)

Other Income (Expense)
Other income		-			7,196
Interest expense		(100,504	)		(163,047	)
Amortization of debt discount		(145,530	)		(515,814	)
Change in fair value of embedded derivative liability		(1,973,500	)		(442,957	)
Loss on sale of equipment		-			(73,750	)
Total other expense		(2,219,534	)		(1,188,372	)

Loss before income taxes		(3,311,918	)		(4,412,050	)

Provision for income taxes		-			-

Net Loss	$	(3,311,918	)	$	(4,412,050	)

Basic and dilutive loss per common share	$	(0.12	)	$	(0.22	)

Weighted average number of common shares outstanding		27,869,543			20,234,995

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements

F- 2

INDOOR HARVEST CORP

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

	Series A Convertible
	Preferred Stock						Common Stock						Additional					Total
	Number of						Number of						Paid in		Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Capital		Deficit			Deficit

Balance - December 31, 2016		250,000		$	2,500			15,213,512		$	15,213		$	3,829,528	$	(3,996,772	)	$	(149,531	)

Issuance of common stock
For cash		-			-			2,060,000			2,060			821,940		-			824,000
For services		-			-			1,549,840			1,550			565,380		-			566,930
Convertible debt converted into common stock		-			-			1,179,651			1,178			173,823		-			175,001
Beneficial conversion feature		-			-			-			-			120,333		-			120,333
Derivative liability		-			-			-			-			101,493		-			101,493
Conversion of preferred stock into common shares		(250,000	)		(2,500	)		416,667			417			35,321		-			33,238
For Alamo CBD asset acquisition		-			-			7,584,008			7,584			1,433,377		-			1,440,961
Issuance of preferred stock for cash		750,000			7,500			-			-			292,501		-			300,001
Voluntary return of stock by related party		-			-			(2,500,000	)		(2,500	)		2,500		-			-
Net loss		-			-			-			-			-		(4,412,050	)		(4,412,050	)
Balance - December 31, 2017		750,000		$	7,500			25,503,678		$	25,502		$	7,376,196	$	(8,408,822	)	$	(999,624	)

Common stock issued for services - third party		-			-			1,443,833			1,444			115,112		-			116,556
Common stock issued for services - related party		-			-			1,062,558			1,063			172,913		-			173,976
Convertible debt converted into common stock		-			-			10,158,816			10,159			489,431		-			499,590
Derivative liability		-			-			-			-			1,127,306		-			1,127,306
Beneficial conversion feature		-			-			-			-			15,750		-			15,750
Voluntary return of stock by related party		-			-			(3,280,470	)		(3,280	)		3,280		-			-
Net loss		-			-			-			-			-		(3,311,918	)		(3,311,918	)
Balance - December 31, 2018		750,000		$	7,500			34,888,415		$	34,888		$	9,299,988	$	(11,720,740	)	$	(2,378,364	)

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements

F- 3

INDOOR HARVEST CORP

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31,
	2018			2017

Cash Flows from Operating Activities:
Net loss	$	(3,311,918	)	$	(4,412,050	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense		12,063			51,507
Impairment loss		-			1,440,961
Amortization of debt discount		145,530			515,814
Loss on investment in joint venture		-			250,000
Loss on the sale of equipment		-			73,750
Change in fair value of embedded derivative liability		1,973,500			442,957
Stock issued for services - third party		116,556			407,000
Stock issued for services - related party		173,976			159,930
Written off of unused commitment fee		50,000			-
Changes in operating assets and liabilities:
Accounts receivable		-			34,853
Other receivable		-			7,323
Inventory		-			2,360
Prepaid expenses		(13,918	)		(4,452	)
Accounts payable and accrued expenses		180,802			33,236
Costs and estimated earnings in excess of billings		-			(20,155	)
Deferred rent		(4,413	)		(2,274	)
Accrued compensation - officers		(2,931	)		(489	)
Net Cash used in Operating Activities		(680,753	)		(1,019,729	)

Cash Flows from Investing Activities:
Proceeds from sale of asset		-			10,800
Purchase of equipment and software		-			(550	)
Investment in joint venture		-			(250,000	)
Net Cash used in Investing Activities		-			(239,750	)

Cash Flows from Financing Activities:
Repayments of note payable		(7,518	)		(6,787	)
Proceeds from convertible notes, less OID costs paid		808,500			500,000
Repayments of convertible note		-			(175,000	)
Settlement of demand note payable, less OID costs paid		-			(225,500	)
Proceeds from issuance of preferred stock		-			300,000
Proceeds from issuance of common stock		-			824,000
Net Cash provided by Financing Activities		800,982			1,216,713

Net change in cash and cash equivalents		120,229			(42,766	)
Cash and cash equivalents, beginning of period		35,453			78,219
Cash and cash equivalents, end of period	$	155,682		$	35,453

Supplemental Cash Flow Information
Cash paid for interest	$	1,742		$	2,469
Cash paid for taxes	$	-		$	-

Non-Cash Investing and Financing Activities:
Beneficial conversion feature	$	15,750		$	120,333
Unused commitment fee	$	-		$	50,000
Settlement of convertible note into common shares	$	499,590		$	100,000
Conversion of convertible note into common shares	$	-		$	75,000
Conversion of preferred shares into common shares	$	-		$	2,500
Derivative liability reclassified to paid-in capital	$	1,127,306		$	-
Voluntary return of common stock by related party	$	3,280		$	2,500
Common stock issued for purchase of Alamo CBD	$	-		$	1,440,961

The Accompanying Notes are an Integral Part of these Consolidated Financial Statements

F- 4

INDOOR HARVEST CORP

NOTES TO 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 is 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.

Basis of Presentation

The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

It is management’s opinion, however, that all material adjustments (consisting of normal and recurring adjustments) have been made which are necessary for a fair financial statement presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year.

Use of Estimates

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

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

Principles of Consolidation

The consolidated financial statements include the accounts of Indoor Harvest Corp. and its wholly-owned subsidiary, Alamo CBD. All significant inter-company accounts and transactions have been eliminated in consolidation.

F- 5

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.

Revenue Recognition

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

	●	identify the contract with a customer;
	●	identify the performance obligations in the contract;
	●	determine the transaction price;
	●	allocate the transaction price to performance obligations in the contract; and
	●	recognize revenue as the performance obligation is satisfied.

Revenue from construction contracts are reported under the percentage of completion method for financial statement purposes. The estimated revenue for each contract reflected in the financial statements represent that percentage of estimated total revenue that costs incurred to date bear to estimated total costs, based on the Company’s current estimates. With respect to contracts that extend over one or more accounting periods, revisions in costs and revenue estimates during the work are reflected in the period the revisions become known. When current estimates of total contract costs indicate a loss, provision is made for the entire estimated loss.

The asset, “costs and estimated earnings in excess of billings on uncompleted contracts,” represents revenues recognized in excess of amounts billed. The liability, “Estimated earnings on uncompleted contracts,” represents billings in excess of revenues recognized.

Billing practices for these projects are governed by the contract terms of each project based upon actual costs incurred, achievement of milestones, or pre-agreed schedules. Billings do not necessarily correlate with revenue recognized under the percentage of completion method of accounting. Except for claims and change orders that are in the process of being negotiated with customers, unbilled work is usually billed during normal billing processes following achievement of the contractual requirements.

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.

F- 6

Fair Value of Financial Instruments

We adopted accounting guidance for financial and non-financial assets and liabilities (ASC 820). The adoption did not have a material impact on our results of operations, financial position or liquidity. This standard defines fair value, provides guidance for measuring fair value and requires certain disclosures. This standard does not require any new fair value measurements, but rather applies to all other accounting pronouncements that require or permit fair value measurements. This guidance does not apply to measurements related to share- based payments. This guidance discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

●	Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

●	Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

●	Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

The following table summarizes fair value measurements by level at December 31, 2018 and 2017, measured at fair value on a recurring basis:

December 31, 2018	Level 1		Level 2		Level 3		Total
Assets
None	$	-	$	-	$	-	$	-

Liabilities
Derivative liabilities	$	-	$	-	$	1,401,111	$	1,401,111

December 31, 2017	Level 1		Level 2		Level 3		Total
Assets
None	$	-	$	-	$	-	$	-

Liabilities
Derivative liabilities	$	-	$	-	$	554,917	$	5545,917

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- 7

Property and Equipment

Property and equipment is 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:

Asset description	Estimated Useful 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.

Goodwill

In accordance with ASC 350 Goodwill is not amortized but evaluated for impairment annually or more often if indicators of a potential impairment are present.

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 and $1,440,961 for impairment charges taken during the year ended December 31, 2018 and 2017, 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, 2018 and 2017, 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.

F- 8

Patent and Patent Application Expenses

Although the Company believes that its patent and underlying technology will have continuing value, the amount of future benefits to be derived from the patent is uncertain. Therefore, patent costs are expensed as incurred.

Research and Development

Research and development expenditures are charged to expense as incurred.

Advertising Expense

Advertising and promotional costs are expensed as incurred.

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect as of the date of the issuance of these financial statements. The following pronouncements may significantly impact future reporting of financial position and results of operations. Management is currently assessing implementation.

In October 2018, FASB issued ASU No. 2018-17, Consolidation - Targeted Improvements to Related Party Guidance for Variable Interest Entities (Topic 810). ASU No. 2018-17 guidance eliminates the requirement that entities consider indirect interests held through related parties under common control in their entirety when assessing whether a decision-making fee is a variable interest. Instead, the reporting entity will consider such indirect interests on a proportionate basis. This pronouncement is effective for public entities for fiscal years ending after December 15, 2019, with early adoption permitted. The Company does not expect the adoption to have a material impact on its consolidated financial statements.

In July 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This update addresses several aspects of the accounting for nonemployee share-based payment transactions and expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The main provisions of the update change the way nonemployee awards are measured in the financial statements. Under the simplified standards, nonemployee options will be valued once at the date of grant, as compared to at each reporting period end under ASC 505-50. At adoption, all awards without established measurement dates will be revalued one final time, and a cumulative effect adjustment to retained earnings will be recorded as the difference between the pre-adoption value and new value. Companies will be permitted to make elections to establish the expected term and either recognize forfeitures as they occur or apply a forfeiture rate. Compensation expense recognition using a graded vesting schedule will no longer be permitted. This pending content is the result of the FASB’s Simplification Initiative, to maintain or improve the usefulness of the information provided to the users of financial statements while reducing cost and complexity in financial reporting. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. Because the Company does not currently have any outstanding awards to non-employees for which a measurement date has not been established the adoption of ASU 2018-07 does not have a material impact to the Company’s financial statements and related disclosures upon adoption. The adoption of this standard will change the way that the Company accounts for non-employee compensation in the future.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under this guidance, lessees will be required to recognize on the balance sheet a lease liability and a right-of-use asset for all leases, with the exception of short-term leases. The lease liability represents the lessee’s obligation to make lease payments arising from a lease, and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. The standard also requires a lessee to recognize a single lease cost allocated over the lease term, generally on a straight-line basis. The new guidance is effective for fiscal years beginning after December 15, 2018. ASU 2016-02 is required to be applied using the modified retrospective approach for all leases existing as of the effective date and provides for certain practical expedients. Early adoption is permitted. The Company is currently evaluating the effects that the adoption of ASU 2016-02 will have on the Company’s financial statements.

F- 9

NOTE 2 - GOING CONCERN

As reflected in the accompanying financial statements, the Company had a net loss of $3,311,918, net cash used in operations of $680,753 and has an accumulated deficit of $11,720,740, for the year ended December 31, 2018. 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 – ASSET ACQUISITION

Alamo CBD, LLC

On January 3, 2017, the Company signed a binding LOI with Alamo CBD to enter discussions to combine and create a medical cannabinoids pharmaceutical group. 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 reverse triangular merger 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 Merger, the member interests (“Alamo Survivor Members”) 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.

As discussed above, management is now accounting for the acquisition of Alamo CBD as an acquisition of assets (and not a business combination).

In addition to the foregoing, following the closing of the transaction, and Alamo CBD being successfully awarded a provisional or full license to produce and dispense cannabis in the State of Texas, Indoor Harvest will issue to the individual Alamo Survivor Members, an additional Eight Million Five Hundred Thousand Dollars ($8,500,000) of newly-issued shares of common stock of Indoor Harvest, par value $0.001, based upon the three (3) day average closing price of the Company’s common stock, as quoted on the OTCQB, prior to the time of issuance.

Additionally, upon Alamo CBD successfully being registered and licensed by the DEA to produce and dispense cannabis under federal law, Indoor Harvest will issue to the individual Alamo Survivor Members, an additional Two Million Five Hundred Thousand Dollars ($2,500,000) cash payment, or newly-issued shares of common stock of Indoor Harvest, par value $0.001, based upon the three (3) day average closing price of the Company’s common stock, as quoted on the OTCQB, prior to the time of issuance, at the option of the individual Alamo Survivor Member. A combination of cash and common stock may be elected by Alamo Survivor Member individually.

On August 8, 2017, Chad Sykes, the Company’s Founder and Chief of Cultivation, returned 2,500,000 shares of common stock to the Company. Mr. Sykes voluntarily returned such shares in order to prevent dilution to the Company’s shareholders as a result of the merger and in order to facilitate the merger. The return of common stock by Chad Sykes was a non-cash transaction and reduces the common stock outstanding as of December 31, 2017.

F- 10

On September 6, 2017, the Company issued an aggregate of 7,584,008 shares of common stock to the members of Alamo CBD related to the Merger. The Company recorded intangible assets at a fair value of $1,440,961 ($0.19 per share) based upon closing price per share of the Company’s common stock on the date the stock was issued. The intangible assets acquired in the transaction, were Alamo CBD’s pending provisional or full license to produce and dispense cannabis in the State of Texas.

During the quarter ended September 30, 2017, the Company’s management decided to impair the intangible assets created by the Alamo CBD transaction, as there are doubts regarding when a license may be issued, as the license is pending and may or may not ever be issued, and whether upon receipt of the license if it will lead to significant positive cash flows. The Company recorded an impairment loss of intangible assets of $1,440,961 in the Statement of Operations for the year ended December 31, 2017.

Contractual Joint Venture with Alamo CBD and Vyripharm Enterprises, LLC

On March 23, 2017, Indoor Harvest entered into a Contractual Joint Venture Agreement by and between Vyripharm Enterprises, LLC (“Vyripharm”) and Alamo CBD, collectively the parties, pursuant to which the parties agreed to participate in an unincorporated joint venture (the “Joint Venture”) for the following business purposes:

●

	i.	In Texas, pursuant to the Texas Compassionate Use Act, as may be amended;

	ii.	In Colorado, pursuant to recent Colorado legislation permitting foreign ownership of entities that grow and/or dispense marijuana products for medical and/or consumer use; and

	iii.	Pursuant to recent United States Drug Enforcement Administration regulations which expand the opportunities for entities providing research involving marijuana and its chemical constituents, as referenced in 21 U.S.C. 822(a)(1) and 21 U.S.C. 823(a), et. seq.

●

The initial term of the Joint Venture was to be five (5) years following the effective date, and the Joint Venture Agreement could be extended beyond this initial term by mutual consent of the parties. Pursuant to the Joint Venture terms, the Company agreed to contribute a total of $5,000,000 on the basis of $1,000,000 per year for each of the first five (5) years of the Initial Term. Should the Company fail to make payment under the Joint Venture, the agreement would terminate and neither party would have further obligation to the other.

The Company paid an initial down payment of $250,000 under the Joint Venture Agreement on March 30, 2017.

Background for the Contractual Joint Venture

The purpose of the above-described change in business and Joint Venture was twofold, as follows:

	●	It would separate the Company’s cannabis and produce related operations, as we indicated was previously a goal.

	●	It would put in place all elements necessary for the resulting Joint Venture, of which the resulting public reporting company would have a significant on-going interest, to become a registered producer under the federal CSA to produce cannabis.

F- 11

As of December 1, 2017, only one entity, the University of Mississippi can legally manufacture Cannabis to supply researchers involved in the various studies about using cannabis to treat maladies such as PTSD or Epilepsy. On August 12, 2016, the DOJ and the DEA issued a policy statement on cannabis issues, as follows:

	●	It is well known that the DOJ and DEA have said that cannabis would continue to be classified as a Schedule 1 drug, like heroin.

	●	It is not so well known that the DOJ and DEA also reset the policy regarding entities that could legally manufacture cannabis to supply researchers involved in various clinical studies using cannabis to treat maladies such as PTSD or Epilepsy.

According to the policy statement, the purpose of this policy reset is to increase the number of U.S. entities registered under the CSA to grow (manufacture) cannabis to supply researchers on the effectiveness of medical grade cannabis in treating these and other maladies.

The CSA under subsection 823(a)(1) provides, DEA is obligated to register only the number of bulk manufacturers of a given schedule I or II controlled substance that is necessary to “produce an adequate and uninterrupted supply of these substances under adequately competitive conditions for legitimate medical, scientific, research, and industrial purposes.”

The policy statement (Federal Register Vol. 81) provided additional explanation on how the DEA would evaluate applications for such registration consistent with the CSA and the obligations of the United States under the applicable international drug control treaty. The Company had reviewed these guidelines and believed all applicable requirements which could not be met by the Company alone would be met by the following:

	●	Our previous Cannabis Pilot Agreement and completed technology trials with Canopy Growth Corporation, a Canadian licensed producer under the Marihuana for Medical Purposes Regulations, had demonstrated that our aeroponic technology could augment and improve the quality and production of cannabis for use in cannabis research.

	●	We believed that the proposed combination with Alamo and the joint venture with Vyripharm Enterprises, LLC, in which the Company would have an equity interest due to its combination with Alamo, would meet all the additional guidelines and conditions set forth regarding the expected required experience in handling of a controlled substance and its related research with cannabis for pharmaceutical use that is one of the conditions of the policy statement.

Voluntary Default of Joint Venture and Status of Application with DPS

F- 12

The Company is a member and is working with the Medical Cannabis Association of Texas and expects both lobbying and legislative efforts currently being undertaken to result in the program being expanded, additional permits being awarded, and new legislation being introduced in 2019 to allow for a separate permitting process to conduct cannabis research in line with the CSA. There is no guarantee that these efforts will result in the Company obtaining a license or permit to produce cannabis in Texas or that legislation will be adopted allowing a separate licensing or permitting process for research purposes.

As part of the Company’s annual impairment evaluation, management decided to impair the goodwill created by the Alamo Merger as there are doubts regarding when a license may be issued, as the license is pending and may or may not ever be issued, and whether upon receipt of the license if it will lead to significant positive cash flows. The Company recorded an impairment of goodwill in the Statement of Operations for the year ended December 31, 2017 of $1,440,961.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following at December 31, 2018 and 2017:

Classification	December 31, 2018			December 31, 2017
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		(39,152	)		(28,779	)
Property and equipment, net	$	14,250		$	24,623

Depreciation expense for the years ended December 31, 2018 and 2017, totaled $10,373 and $49,797, respectively.

During the year ended December 31, 2017, the Company sold $23,467 of equipment in exchange for $10,800. In addition, the Company wrote off $201,651 of equipment primarily related to the fabrication of vertical farming equipment for produce. As a result of these disposals, the Company recorded a loss of $73,750 that was recorded in the Statement of Operations within general and administrative expenses.

NOTE 5 - INTANGIBLE ASSETS

There were no impairment charges taken for the domain name during the year ended December 31, 2018 and 2017.

F- 13

Intangible assets consist of the following at December 31, 2018 and 2017:

Classification	December 31, 2018			December 31, 2017
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		(6,380	)		(4,690	)
Intangible assets, net	$	4,202		$	5,892

Amortization expense for the years ended December 31, 2018 and 2017, totaled $1,690 and $1,712, respectively.

NOTE 6 - NOTE PAYABLE

On June 5, 2015, the Company entered into a five-year loan agreement totaling $36,100. The loan carries an interest rate of 10.25%. During the year ended December 31, 2018 and 2017, the Company repaid $7,518 and $6,789 of the principal and the remaining balance as of December 31, 2018 and 2017 is $12,825 and $20,343, of which $8,332 and $7,520 is recorded as a current portion of note payable, respectively.

Year Ending December 31,	Amount

2019	$	9,258
2020		4,629
Total		13,887
Amount representing interest payments		1,062
Present value of future payments		12,825
Less: current portion		8,332
Loan payable	$	4,493

NOTE 7 - CONVERTIBLE NOTES PAYABLE

Convertible notes payable at December 31, 2018 and 2017 are as follows:

	December 31, 2018			December 31, 2017
Note 1	$	32,027		$	475,000
Note 2		50,000			50,000
Note 3		550,000			-
Note 4		341,050
Total convertible notes payable		973,077			525,000

Less: Unamortized debt discount		(22,311	)		(69,541	)
Total convertible notes		950,766			455,459

Less: current portion of convertible notes		950,766			455,459
Long-term convertible notes	$	-		$	-

On March 20, 2017, the Company entered into a settlement agreement relating to a promissory note with Chuck Rifici Holdings, Inc originally dated September 26, 2016 (“Rifici Note”). The Company settled the amount owed by paying $269,498 in cash. The Company was released from any further liability under this Rifici Note upon payment of this amount.

F- 14

On March 20, 2017, the Company entered into a settlement agreement relating to two (2) promissory notes with FirstFire Global Opportunities Fund, LLC dated October 19, 2016 and December 12, 2016. Pursuant to the settlement, the Company paid the holder an aggregate of $252,917 in cash and issued 333,333 shares of common stock with a fair value of $100,000 based upon the conversion price of $0.30 per share. The Company was released from any further liability under this FirstFire Global Opportunities Fund, LLC note upon payment of this amount.

Note 1

On March 24, 2017, the Company entered into a securities purchase agreement with Tangiers Global, LLC (“Tangiers”) relating to the issuance and sale of notes (“Note 1”) in the aggregate principal amount of up to $550,000, which includes a 10% original issue discount. Note 1 is convertible into shares of common stock at a price equal to $0.30 per share; provided, however that if Note 1 is not retired on or before the maturity date, defined in Note 1 as a “Maturity Default” the conversion price shall 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 date that the Company receives a notice of conversion. The Tangiers Note 1 carries interest on the unpaid principal amount at the rate of 8% per annum and is due and payable eight months from the effective date of each payment. As of December 31, 2018 and 2017, the balance under Note 1 is $34,755 and $519,000, which includes $0 and $44,000 guaranteed interest and $2,728 and $0 accrued interest, respectively. As of December 31, 2018 and 2017, Note 1 can be converted into 1,753,111 and 3,280,255 shares of the Company’s common stock, respectively.

On October 12, 2017, the Company entered into an Investment Agreement with Tangiers. Pursuant to the terms of the Investment Agreement, Tangiers committed to purchase up to $2,000,000 of our common stock over a period of up to 36 months. From time to time during the 36-month period commencing from the effectiveness of the registration statement, we may deliver a put notice to Tangiers which states the dollar amount that we intend to sell to Tangiers on a date specified in the put notice. The maximum investment amount per notice must be no more than 200% of the average daily trading dollar volume of our common stock for the eight (8) consecutive trading days immediately prior to date of the applicable put notice and such amount must not exceed an accumulative amount of $250,000. The minimum put amount is $5,000. The purchase price per share to be paid by Tangiers will be the 80% of the of the average of the two lowest closing bid prices of the common stock during the pricing period applicable to the put notice, provided, however, an additional 10% will be added to the discount of each put if (i) we are not DWAC eligible and (ii) an additional 15% will be added to the discount of each put if we are under DTC “chill” status on the applicable date of the put notice.

On October 10, 2017, the Company executed Amendment #1 to the Tangiers Note 1 for a final draw of $250,000 payment plus a 10% original issue discount. Amendment #1 modified the maturity date for the Tangier Note from eight months to six months from the effective date of each payment. All other terms and conditions of the Tangiers Note 1 remain effective.

The execution of Amendment #1 to Note 1 on October 10, 2017 caused the Company to default on the first draw due under Note 1 due to the acceleration of the maturity date. The default allows Tangiers to demand payment in cash equal to 150% of the outstanding principal and interest, which is automatically added to the outstanding principle, and convert all or a portion of the outstanding principal into shares of common stock of the Company. The default conversion rate of Note 1 is now the lower of the conversion rate then in effect or 65% of the lowest trading price for the 15 days prior to Tangiers’ notice of conversion. As of May 1, 2018, Tangiers has informed the Company that they have elected at this time not to enforce the default interest rate of 18% under Note 1 and also not to enforce the fees, reserving its rights to enforce the foregoing in their discretion.

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%. As of December 31, 2018 and 2017, the balance under Note 2 is $58,123 and $55,000, which includes $5,000 and $5,000 guaranteed interest and $3,123 and $0 accrued interest, respectively. As of December 31, 2018 and 2017, Note 2 can be converted into 2,931,818 and 300,120 shares of the Company’s common stock, respectively.

F- 15

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. As of December 31, 2018, the balance under Note 3 is $603,024, which includes $44,000 guaranteed interest and $9,024 accrued interest. As of December 31, 2018, Note 3 can be converted into 24,874,364 shares of the Company’s common stock.

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, the Company executed Amendments #1 to the Tangiers Note 4 for draws of $171,050. All other terms and conditions of the Tangiers Note 4 remain effective. As of December 31, 2018, the balance under Note 4 is $368,334, which includes $27,284 guaranteed interest.

During the year ended December 31, 2018 and 2017, the Company accrued $120,257 and $49,000, respectively, in interest expense related to the outstanding the notes.

Debt Discount and Original Issuance Costs

During the year ended December 31, 2018 and 2017, the Company recorded debt discounts totaling $98,300 and $383,786, respectively. The debt discount amount consists of debt discount due to beneficial conversion features, warrant, original issue costs, and debt issue costs.

The debt discounts recorded in 2018 and 2017, pertain to beneficial conversion feature on the convertible notes. The notes are required to be bifurcated and reported at fair value on the date of grant.

The Company amortized $145,530 and $466,862 to interest expense during the years ended December 31, 2018 and 2017, as follows:

	December 31, 2018			December 31, 2017
Debt discount, beginning of period	$	69,541		$	152,617
Additional debt discount and debt issue cost		98,300			383,786
Amortization of debt discount and debt issue cost		(145,530	)		(466,862	)
Debt discount, end of period	$	22,311		$	69,541

F- 16

Debt Issuance Costs for Convertible Note

During the year ended December 31, 2018 and 2017, the Company did not pay any debt issue costs.

NOTE 8 - DERIVATIVE LIABILITIES

The Company identified the conversion features embedded within its convertible debts as financial derivatives. The Company has determined that the embedded conversion option should be accounted for at fair value.

The following schedule shows the change in fair value of the derivative liabilities at year end December 31, 2018:

Balance - December 31, 2017	$	554,917
Addition of new derivatives recognized as loss on derivatives		1,486,260
Settled on issuance of common stock		(1,127,306	)
Gain on change in fair value of the derivative		487,240
Balance - December 31, 2018		1,401,111
Less: current portion		(1,401,111	)
Long-term derivative liabilities	$	-

The following schedule shows the change in fair value of the derivative liabilities at year end December 31, 2017:

Derivative liabilities - December 31, 2016	$	—
Add fair value at the commitment date for convertible notes issued during the current year		213,453
Less derivatives due to conversion		(101,493	)
Fair value mark to market adjustment for derivatives		442,957
Derivative liabilities - December 31, 2017		554,917
Less: current portion		(554,917	)
Long-term derivative liabilities	$	—

The aggregate loss on derivatives during the year ended December 31, 2018 and 2017 was $2,024,858 and $442,957, respectively.

NOTE 9 - 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 February 5, 2018, Dr. Coleman and Benjamin Coleman voluntarily returned and canceled an aggregate of 3,280,470 common shares in order to prevent dilution to the shareholders during the Company’s efforts to secure new senior management, provide additional incentive equity and to form an advisory board. The return of common stock by Dr. Coleman and Benjamin Coleman was a non-cash transaction.

F- 17

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.

On January 16, 2017, the Company issued 145,740 shares of common stock related to a Director Agreement with Pawel Hardej. The Company recorded fair value of $64,126 ($0.44 per share) based upon the most recent trading price per share of the Company’s stock.

On January 16, 2017, the Company issued 41,640 shares of common stock related to a Director Agreement with John Zimmerman. The Company recorded fair value of $18,322 ($0.44 per share) based upon the most recent trading price per share of the Company’s stock.

F- 18

On January 16, 2017, the Company issued 62,460 shares of common stock related to a Director Agreement with John Choo. The Company recorded fair value of $27,482 ($0.44 per share) based upon the most recent trading price per share of the Company’s stock.

On August 8, 2017, Chad Sykes, the Company’s Founder and Chief of Cultivation, returned 2,500,000 shares of common stock to the Company. Mr. Sykes voluntarily returned such shares in order to prevent dilution to the Company’s shareholders as a result of the Alamo Merger and in order to facilitate the merger. The return of common stock by Chad Sykes was a non-cash transaction and reduces the common stock outstanding as of December 31, 2017.

On August 9, 2017, Chad Sykes, the Company founder, tendered his resignation as a Director and member of the Board of Directors as part of the Company’s merger agreement with Alamo CBD.

On August 9, 2017, John Choo tendered his resignation as a Director and member of the Board of Directors as part of the Company’s merger agreement with Alamo CBD.

On August 9, 2017, Pawel Hardej tendered his resignation as a Director and member of the Board of Directors as part of the Company’s merger agreement with Alamo CBD.

On August 9, 2017, John Seckman was elected a Director and member of the Board of Directors. On November 1, 2017, John Seckman resigned as a Director of the Company and as a member of the Board of Directors, effective December 4, 2017. Mr. Seckman’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies (including accounting or financial policies) or practices, the Company’s management or the Board. Mr. Seckman’s resignation was due to time constraints based on new business and increasing demands of John Seckman and Associates, of which Mr. Seckman is principal.

On August 9, 2017, we entered into a Director Agreement with Rick Gutshall. The Company agreed to reimburse the Director for reasonable travel and other incidental expenses incurred by the Director in performing his services and attending meetings as approved in advance by the Company.

On August 9, 2017, we entered into a Director Agreement with Annette Knebel. The Company agreed to reimburse the Director for reasonable travel and other incidental expenses incurred by the Director in performing his services and attending meetings as approved in advance by the Company.

On August 9, 2017, we entered into a Director Agreement with Dr. Lang Coleman. The Company agreed to reimburse the Director for reasonable travel and other incidental expenses incurred by the Director in performing his services and attending meetings as approved in advance by the Company.

On September 6, 2017, the Company issued 2,957,763 shares of common stock to Dr. Lang Coleman, Director, related to the merger of the Company and Alamo CBD. The Company recorded fair value of $561,975 ($0.19 per share) based upon the most recent trading price per share of the Company’s stock.

On September 6, 2017, the Company issued 758,401 shares of common stock Rick Gutshall, former Interim-Chief Executive Office, former Chief Financial Officer, and Director, related to the merger of the Company and Alamo CBD. The Company recorded fair value of $144,096 ($0.19 per share) based upon the most recent trading price per share of the Company’s stock.

On September 15, 2017, the Company issued 250,000 shares of common stock related to an Employment Agreement with Annette Knebel, Chief Financial Officer and Director and former Chief Accounting Officer. The Company recorded fair value of $50,000 ($0.20 per share) based upon the most recent trading price per share of the Company’s stock.

F- 19

NOTE 10 - SHAREHOLDERS’ EQUITY

Convertible Series A Preferred Stock

During the third quarter of fiscal 2016, the Company initiated a subscription agreement to offer accredited investors up to 1,000,000 units (“Units”) of securities, each Unit consists of one (1) share of Series A Convertible Preferred Stock and one (1) Series A Warrant (“Warrant”). The price per Unit was $0.50 for a maximum aggregate proceeds of $500,000. There are no dividends on the Series A Convertible Preferred Stock. The Warrants were exercisable at $0.50 per share for a period of one year. As of September 30, 2017, the warrants were not exercised. Therefore, the Company has disclosed the expiration of the Warrants.

From August 15 to August 29, 2016, the Company sold an aggregate of 250,000 Units to three (3) investors for total proceeds of $125,000. During the year ended December 31, 2018 and 2017, the Company amortized $0 and $33,238 of debt discount related to the warrants, respectively. The remaining debt discount related to the warrants is $0.

On March 20, 2017, the Company’s Series A Preferred Convertible Stock shareholders (“Series A Holders”) each voted to waive and remove the provisions of Section 5(iii) of the Certificate of Designations of the Series A Preferred Stock Designation. Series A Holders have each agreed individually and also as a group to convert their Series A Convertible Preferred Stock into common stock at a conversion price equal to $0.30 per share. A total of 250,000 shares of the Company’s Series A Preferred Convertible Stock were converted into an aggregate of 416,667 shares of common stock. As a result of this action, there currently are no Series A Convertible Preferred Stock issued and outstanding.

From April 26, 2017 through May 3, 2017, the Company sold an aggregate of 750,000 shares of Series A Preferred Common Stock to thirteen (13) U.S. accredited investors at $0.40 per share for proceeds of $300,000.

As at December 31, 2018 and 2017, there were 750,000 shares of Series A Convertible Preferred Stock issued and outstanding.

Common Stock

Issued in fiscal year 2018

On January 9, 2018, the Company issued 899,685 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $100,000 of Note 1 at a conversion price of $0.11.

On January 15, 2018, the Company issued 200,000 shares of common stock related to an Employment Agreement with Sandra Fowler, Chief Marketing Officer. The Company recorded a fair value of $66,000 ($0.33 per share) based upon the most current trading price of the Company’s stock.

On February 20, 2018, the Company issued 43,387 shares of common stock related to an Employment Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $7,810 ($0.18 per share) based upon the most current trading price of the Company’s stock.

On February 23, 2018, the Company issued 12,135 shares of common stock related to an Director Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $2,063 ($0.17 per share) based upon the most current trading price of the Company’s stock.

On March 5, 2018, the Company issued 269,716 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $25,000 of Note 1 at a conversion price of $0.09.

On March 20, 2018, the Company issued 30,000 shares of its common stock to members of the Company’s Advisory Board. The Company recorded a fair value of $4,200 ($0.14 per share) based upon the most recent trading price of the Company’s stock.

F- 20

On March 21, 2018, the Company issued 295,631 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $25,000 of Note 1 at a conversion price of $0.08 per share.

On April 13, 2018, the Company issued 769,231 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $50,000 of Note 1 at a conversion price of $0.065 per share.

On April 17, 2018, the Company issued 300,000 shares of common stock related to an Employment Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $51,000 ($0.17 per share) based upon the most current trading price of the Company’s stock.

On May 20, 2018, the Company issued 99,012 shares of common stock related to an Employment Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $16,832 ($0.17 per share) based upon the most current trading price of the Company’s stock.

On May 23, 2018, the Company issued 30,000 shares of common stock related to an Director Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $5,100 ($0.17 per share) based upon the most current trading price of the Company’s stock.

On June 21, 2018, the Company issued 295,858 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $25,000 of Note 1 at a conversion price of $0.0845 per share.

On June 6, 2018, the Company issued 30,000 shares of its common stock to members of the Company’s Advisory Board. The Company recorded a fair value of $2,550 ($0.085 per share) based upon the most recent trading price of the Company’s stock.

On June 27, 2018, the Company issued 424,500 shares of common stock related to an advisory agreement with Electrum Partners, LLC. The Company recorded a fair value of $50,940 ($0.12 per share) based upon the most current trading price of the Company’s stock.

On July 2, 2018, the Company issued 244,755 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $17,500 of Note 1 at a conversion price of $.072.

On July 12, 2018, the Company issued 269,231 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $17,500 of Note 1 at a conversion price of $.065.

On August 1, 2018, the Company issued 50,000 shares of its common stock to Electrum Partners pursuant to an advisory agreement. The Company recorded fair value of $4,500 ($0.09 per share) based upon the most recent trading price per share of the Company’s stock.

On August 2, 2018, the Company issued 1,307,846 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $42,590 of Note 1 at a conversion price of $.031.

On August 13, 2018, the Company issued 460,617 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $15,000 of Note 1 at a conversion price of $.034.

On July 2, 2018, the Company issued 244,755 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $17,500 of Note 1 at a conversion price of $.07.

On July 12, 2018, the Company issued 269,231 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $17,500 of Note 1 at a conversion price of $.07.

F- 21

On August 2, 2018, the Company issued 1,307,846 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $42,590 of Note 1 at a conversion price of $.033.

On August 13, 2018, the Company issued 460,617 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $15,000 of Note 1 at a conversion price of $.033.

On August 22, 2018, the Company issued 583,333 shares of its common stock to Ideal Business Partners pursuant to an advisory agreement. The Company recorded fair value of $35,000 ($0.06 per share) based upon the most recent trading price per share of the Company’s stock.

On September 1, 2018, the Company issued 50,000 shares of its common stock to Electrum Partners pursuant to an advisory agreement. The Company recorded fair value of $3,000 ($0.06 per share) based upon the most recent trading price per share of the Company’s stock.

On September 20, 2018, the Company issued 30,000 shares of its common stock to members of the Company’s Advisory Board. The Company recorded a fair value of $1,800 ($0.06 per share) based upon the most recent trading price of the Company’s stock.

On September 24, 2018, the Company issued 569,801 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $20,000 of Note 1 at a conversion price of $.035.

On September 28, 2018, the Company issued 1,424,501 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $50,000 of Note 1 at a conversion price of $.035.

On October 1, 2018, the Company issued 2,621,083 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $92,000 of Note 1 at a conversion price of $.035.

On October 1, 2018, the Company issued 50,000 shares of its common stock to Electrum Partners pursuant to an advisory agreement. The Company recorded fair value of $6,000 ($0.12 per share) based upon the most recent trading price per share of the Company’s stock.

On November 1, 2018, the Company issued 50,000 shares of its common stock to Electrum Partners pursuant to an advisory agreement. The Company recorded fair value of $3,500 ($0.07 per share) based upon the most recent trading price per share of the Company’s stock.

On December 1, 2018, the Company issued 50,000 shares of its common stock to Electrum Partners pursuant to an advisory agreement. The Company recorded fair value of $3,200 ($0.06 per share) based upon the most recent trading price per share of the Company’s stock.

On December 20, 2018, the Company issued 30,000 shares of its common stock to members of the Company’s Advisory Board. The Company recorded a fair value of $1,446 ($0.05 per share) based upon the most recent trading price of the Company’s stock.

On November 20, 2018, the Company issued 99,012 shares of common stock related to an Employment Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $5,545 ($0.06 per share) based upon the most current trading price of the Company’s stock.

On November 23, 2018, the Company issued 30,000 shares of common stock related to a Director Agreement with Daniel Weadock, Chief Executive Officer. The Company recorded a fair value of $1,890 ($0.06 per share) based upon the most current trading price of the Company’s stock.

On December 3, the Company issued 186,000 shares of its common stock to Daniel Strachman to an advisory agreement. The Company recorded fair value of $10,416 ($0.06 per share) based upon the most recent trading price per share of the Company’s stock.

F- 22

On December 20, 2018, the Company issued 730,861 shares of its common stock to Tangiers pursuant to Tangier’s conversion of $20,000 of Note 1 at a conversion price of $.027.

Issued in fiscal year 2017

On January 17, 2017, the Company issued 800,000 shares of common stock to Lyons Capital, LLC for a six-month consulting and road show services agreement. The Company recorded fair value of $352,000 ($0.44 per share) based upon the most recent trading price per share of the Company’s stock.

From February 22, 2017 through March 15, 2017, the Company sold, in reliance upon Regulation D Rule 506, a total of 2,060,000 shares of common stock to seventeen (17) U.S. accredited investors at $0.40 per share for cash totaling $824,000.

On March 20, 2017, the Company’s Series A Preferred Convertible Stock shareholders (“Series A Holders”) each voted to waive and remove the provisions of Section 5(iii) of the Certificate of Designations of the Series A Preferred Stock. Series A Holders have each agreed individually and also as a group to convert their Series A Convertible Preferred Stock into common stock at a conversion price equal to $0.30 per share. A total of 250,000 shares of the Company’s Series A Preferred Convertible Stock were converted into an aggregate of 416,667 shares of common stock.

On March 20, 2017, the Company entered into a settlement agreement relating to two (2) promissory notes with FirstFire Global Opportunities Fund, LLC dated October 19, 2016 and December 12, 2016. Pursuant to the settlement, the Company paid the holder an aggregate of $252,917 in cash and issued 333,333 shares of common stock. The Company was released from any further liability under this FirstFire Global Opportunities Fund, LLC note upon payment of this amount.

On March 24, 2017, the Company entered into a securities purchase agreement with Tangiers Global, LLC (“Tangiers”) relating to the issuance and sale of notes (“Tangiers Note”) in the aggregate principal amount of up to $550,000, which includes a 10% original issue discount. The Tangiers Note is convertible into shares of common stock at a price equal to $0.30 per share. On October 10, 2017, the Company executed Amendment #1 (“Amendment #1”) to the Tangiers Note for a final draw of $250,000 payment plus a 10% original issue discount (the “Final Draw”). Amendment #1 modified the maturity date of the Tangiers Note from eight months to six months from the effective date of each payment. In addition, Amendment #1 included use of proceeds for the $250,000 received from Tangiers. All other terms and conditions of the Tangiers Note remain effective and were not amended.

On June 1, 2017, the Company issued 250,000 shares of common stock for a 12-month investor relations consulting agreement. The Company recorded fair value of $55,000 ($0.22 per share) based upon the most recent trading price per share of the Company’s stock.

On October 12, 2017, the Company issued a promissory note to Tangiers Global, in the principal amount of $50,000 in order to induce Tangiers Global to enter into the Investment Agreement. The note bears interest at a rate of 10% per annum and matures on May 12, 2018. Tangiers Global may, at any time, convert the unpaid principal amount of the note into shares of the Company’s common stock at a conversion price of $0.1666 per share.

On October 17, 2017, the Company issued 329,670 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $30,000 of Note 1 at a conversion price of $0.09.

F- 23

On December 18, 2017, the Company issued 516,648 shares of its common stock to Tangiers pursuant to Tangiers’ conversion of $45,000 of Note 1 at a conversion price of $0.09.

Common Stock Warrants and option

For the year ended December 31, 2018 and 2017, no warrants or options were outstanding.

NOTE 11 - 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, 2018 and 2017 are as follows:

Description	2018			2017

Deferred tax assets
Net operating losses	$	1,388,107			1,118,472
Deferred tax liabilities
Accelerated tax depreciation		19,183			19,183
Net deferred tax assets		1,407,290			1,137,655

Less: Valuation allowance		(1,407,290	)		(1,137,655	)
Net	$	-			-

At December 31, 2018 and 2017, the Company has provided a full valuation allowance for the deferred tax assets. The Company’s accumulated net operating loss as of December 31, 2018 of $7,049,395, 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.

This loss carryforward expires according to the following schedule:

Year Ending December 31,	Amount

2033	$	217,074
2034		368,378
2035		761,615
2036		1,610,192
2037		2,899,509
2038		1,192,627
	$	7,049,395

NOTE 12 - COMMITMENTS & CONTINGENCIES

On February 20, 2014, the Company signed a 60-month lease on a 10,000 sq. ft. office/warehouse facility and paid a deposit of $12,600. The monthly base rent is $4,200 increasing 6% every two years for the term of the lease. The property is adequate for all of the Company’s currently planned activities.

F- 24

Deferred rent payable at December 31, 2018 and 2017 was $1,826 and $6,239, respectively. Deferred rent payable is the sum of the difference between the monthly rent payment and the straight-line monthly rent expense of an operating lease that contains escalated payments in future periods.

Rent expense for the years ended December 31, 2018 and 2017, were $47,618 and $52,550, respectively

At December 31, 2018, rental commitments are as follows:

Years Ending December 31,	Amount
2019	$	18,876
Total	$	18,876

NOTE 13 - SUBSEQUENT EVENTS

(to update)

F- 25

Results of Operations

Year ended December 31, 2018 compared to year ended December 31, 2017

The following table presents our operating results for the year ended December 31, 2018 compared to December 31, 2018:

	Year Ended
	December 31,
	2018			2017			Change			%
Revenue	$	-		$	-		$	-			-
Operating expenses
Depreciation and amortization expense		12,063			51,507			(39,444	)		(77	)%
Research and development		-			1,625			(1,625	)		(100	)%
Loss on investment in joint venture		-			250,000			(250,000	)		(100	)%
Impairment loss		-			1,440,961			(1,440,961	)		(100	)%
Professional fees		350,839			418,092			(67,253	)		(16	)%
General and administrative expenses		729,482			1,061,493			(332,011	)		(31	)%
Total operating expenses		1,092,384			3,223,678			(2,131,294	)		(66	)%
Loss from operations		(1,092,384	)		(3,223,678	)		2,131,294			(66	)%
Other expense
Other income (expense)		-			7,196			(7,196	)		(100	)%
Loss on investment in joint venture		-			250,000			(250,000	)		(100	)%
Interest expense		(100,504	)		(163,047	)		62,543			(38	)%
Amortization of debt discount		(145,530	)		(515,814	)		370,284			(72	)%
Change in fair value of embedded derivative liability		(1,973,500	)		(442,957	)		(1,530,543	)		346	%
Total other income (expense)		(2,219,534	)		(1,188,372	)		(1,031,162	)		87	%

Net loss	$	(3,311,918	)	$	(4,412,050	)	$	1,100,132			(25	)%

Revenues

During the year ended December 31, 2018 and December 31, 2017, the Company generated no revenue.

Operating Expenses

Other Expense

Net Loss

As a result of the factors discussed above, net loss for the year ended December 31, 2018 and 2017 was $3,311,918 and $4,412,050, respectively, for a decrease of $1,100,132 or 25%.

Liquidity and Capital Resources

The following table provides selected financial data about our Company as of December 31, 2018 and December 31, 2017, respectively.

Working Capital

	December 31,			December 31,
	2018			2017			Change			%
Current assets	$	186,652		$	89,905		$	96,747			108	%
Current liabilities	$	2,578,975		$	1,119,821		$	1,459,154			130	%
Working capital deficiency	$	(2,392,323	)	$	(1,029,916	)	$	(1,362,407	)		132	%

Cash Flows

	Year Ended
	December 31,
	2018			2017			Change
Cash used in operating activities	$	(680,753	)	$	(1,019,729	)	$	338,976
Cash used in investing activities	$	-		$	(239,750	)	$	239,750
Cash provided by financing activities	$	800,982		$	1,216,713		$	(415,731	)
Net Change in Cash During Period	$	120,229		$	(42,766	)	$	162,995

As at December 31, 2018, our Company’s cash balance was $155,682 and total assets were $205,104. As at December 31, 2017, our Company’s cash balance was $35,453 and total assets were $133,020.

As at December 31, 2018, our Company had total liabilities of $2,583,468, compared with total liabilities of $1,132,644 as at December 31, 2017.

Cash Flow from Operating Activities

Cash Flow from Investing Activities

Cash Flow from Financing Activities

Item 9 – Changes in and Disagreements With Accountants on Accounting and Financial Disclosures.

None.

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, 2018. Based upon such evaluation, Chief Executive Officer (the principal executive officer and principal financial officer) have concluded that, as of December 31, 2018, 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, 2018, 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, 2018, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2018 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, 2018. The basis for the conclusions that such internal control was ineffective included the following considerations:

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

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

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

Material risks associated with the above issues include the following:

	●	Because the Company currently has insufficient written policies and procedures with regard to financial reporting, this could cause the Company to be inefficient and potentially encounter errors in preparing its financial reports due to the lack of a written policy for the company to follow.

	●	Because there is a lack of formal process and timeline, this cold lead the Company not to be able to timely prepare its financial statements and could cause it to either file a report late or to a file a report which may contain some errors.

	●	Because the Company’s management is composed of a small number of persons, there is a lack of segregation of duties.

This report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. We were not required to have, nor have we, engaged the Company’s independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Controls over Financial Reporting

There has been no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended December 31, 2018 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 10. Directors, Executive Officers and Corporate Governance.

The following sets forth our Officers and Directors as of May 31, 2019. 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	54
Rick Gutshall	Director	45
Dr. Lang Coleman	Director	65

Effective May 15, 2019, the Company (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.

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 2019 plans.

Thomas Cook. Mr. Cook, age 54, was appointed as interim Chief Executive Officer and interim Chief Financial Officer to the Company effective May 15, 2019. His appointment was for limited attention and services while the Company restructures management, business and seeks potential long term CEO and CFO candidates. Mr. Cook has years of experience dealing with management teams of companies, private and public, and law firms, financial firms, and others and is skilled at dynamic communication, governmental filings compliance (mostly on a state basis), follow-up skills, and organizational record keeping. He has about 22 years account management experience within the corporate compliance industry, approximately 10 years of which was with CT Corporation, a Wolters Kluwer company. He founded his own compliance firm, TCE Compliance Services, about 8 years ago and assists the Company, for nominal compensation, on certain standard corporate filing services. He honorably served and was discharged, the United States Marine Corps, 1984 to 1988.

Rick Gutshall. Mr. Gutshall served as our Interim Chief Executive Officer from August 2017 to February 20, 2018 and has served as a member of our Board of Directors since August 2017, and served as our Chief Financial Officer from August 2017 to December 2017. Since 2016, Mr. Gutshall has served as Chief Financial Officer of Alamo CBD LLC, and since 1999, he has served as a principal of KW Gutshall & Associates (“KW Gutshall”). Mr. Gutshall is responsible for personalized financial planning, wealth management and retirement planning for clients at KW Gutshall and has been a licensed financial advisor since 1997. Mr. Gutshall received his Bachelor of Business Administration, Management and Operations from Concordia University-Austin in 1997. As a member of the Board, Mr. Gutshall will contribute the benefits of his executive leadership and management experience in finance, business development, contract negotiations and public speaking. On February 20, 2018, Mr. Rick Gutshall resigned as Interim Chief Executive Officer of the Company.

Dr. Lang Coleman . In August 2017, Dr. Lang Coleman was appointed as a member of the Board. Dr. Coleman is a proud disabled Army veteran, long-time Texas resident, and psychologist specializing in Neuropsychology. Dr. Coleman received his B.S. and M.A. from Austin Peay State University in Clarksville, Tennessee, his Ph.D. in Clinical Psychology from the University of Kansas, and he attended law school at the University of Texas at Austin. Dr. Coleman completed his medical internship at William Beaumont Army Medical Center in El Paso, Texas, and spent 22 years, from 1972 through 1994, in U.S. Army Psychiatry. A pensioned Army Officer and decorated combat veteran, Dr. Coleman formerly directed soldiers and planned both treatments and evacuations for psychiatric casualties in a theatre of war for over 30,000 soldiers and marines. From his time as an Army Major, he has extensive knowledge and experience with chain of custody in his dealings with deliverables ranging from drug-testing biological samples to weapons and ordinance and holds the Combat Medical Badge. After serving 17 years, from 1998 through 2015, Dr. Coleman retired as a tenured professor of psychology at St. Philip’s College in San Antonio, Texas, where he taught Abnormal Psychology and Statistics courses. Dr. Coleman authored curriculum in 1994 for a juvenile justice alternative education program and licensed the copyright, for one year, to The Key Corporation. The school was successfully launched in Dallas. As the CEO of Alamo CBD since March 2017, Dr. Coleman has regularly facilitated, sponsored and participated in many community activities. He has frequently appeared on television and at the Texas State Capital as an advocate for the Compassionate-Use Program. As a member of the Board, Dr. Coleman will contribute the benefits of his military experience treating veterans with post-traumatic stress disorder, or PTSD, and other medical conditions and will manage the Company’s medical and science policy and procedures. His contributions and deep understanding of all aspects of our business and industry will provide considerable experience in developing the Company’s medical and scientific procedures and policies.

Prior Management.

Daniel Weadock. On February 20, 2018, Mr. Daniel Weadock was appointed Chief Executive Officer and Director of the Company. Since August 2017, Mr. Weadock was Co-Founder and CEO of Junebug Technologies, LLC, a next generation microbial biotechnology company focused on developing solutions based on photosynthetic bacteria and other versatile microorganisms. Since 2005, Mr. Weadock also has served as President and CEO of The International in Bolton, Massachusetts, a world class golf and special event destination with its own boutique lodge and signature restaurant. As a change maker, he led a cultural and business transformation, from a very traditional and conservative enterprise to a more modern, open and forward-thinking organization. Prior to 2005, Mr. Weadock served as Vice President of Enterprise Sales for Williams Telecommunications from 2002 through 2004, building a new sales team and opening new doors in enterprise markets. From 1999 through 2001, Mr. Weadock served as Co-Founder and CEO of FilmAxis, an online, broadband virtual film market, where he led business plan development and capital raising. Prior to FilmAxis, Mr. Weadock was an Executive Vice President of Consortio from 1999 through 2000, a Seattle, Washington incubator of internet-based business to business communities, where he led business development. Before joining Consortio, Mr. Weadock spent a year working with Fast Engines as their VP of Sales and President, from 1998 through 1999, his first start up in Cambridge, Massachusetts, a small software development company. Prior to Fast Engines, Mr. Weadock spent more than 10 years with Cable & Wireless Plc in a variety of roles around the world. After landing what was at the time one of the largest data networking infrastructure deals in Cable & Wireless’ history, Mr. Weadock was awarded a Fellowship to MIT’s Sloan School of Management where he earned a Master of Science in Management. Mr. Weadock is a forward-thinking visionary who will bring his many years of experience as a thought leader and an agent of change to the next stage of the Company’s development. As a member of the board, Mr. Weadock contributes the benefits of his executive leadership and management experience in developing corporate strategy, assessing emerging industry trends, and business operations. The Company believes that his contributions and deep understanding of all aspects of our business, products and markets will provide substantial experience to fuel our corporate growth.

Family Relationships

There are no family relationships between any director or executive officer.

Involvement in Certain Legal Proceedings

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years, to our belief, in any of the following:

	●	Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,

	●	Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),

	●	Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,

	●	Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

	●	Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity.

	●	Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity.

	●	Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.

Item 11. Executive Compensation.

The table below summarizes all compensation awarded to, earned by, or paid to each named executive officer for the Company’s last completed fiscal year 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		2018	(2)
		2017			70,000		—		—		—		—		—		—		70,000

Daniel Weadock, CEO		2018			0
		2017

Rick Gutshall		2018			0
Former interim CEO and Former CFO (3)		2017

(1)	For valuation purposes, the dollar amount shown is calculated based on the market price of the common stock on the grant dates. The number of shares granted, the grant date, and the market price of such shares for each named executive officer is set forth below.

(2)	Chad Sykes, Founder, resigned as CEO, Secretary on January 2, 2017 and was appointed Chief Innovation Officer. On August 9, 2017, Mr. Sykes resigned from his position as Chief Innovation Officer. In March, 2019, Mr. Sykes resigned from his executive officer positions with the Company.

(3)	Mr. Gutshall served as the Company’s Chief Financial Officer from August 2017 to December 2017, and as the Company’s Interim Chief Executive Officer from August 2017 to February 20, 2018. On February 20, 2018, Mr. Rick Gutshall resigned as Interim Chief Executive Officer of the Company. Mr. Gutshall was not compensated in any way by the Company relating to his services as the Company’s Interim Chief Executive Officer or as the Company’s Chief Financial Officer in 2017. Mr. Gutshall did receive 758,401 shares of the Company’s common stock in connection with the Alamo Merger, however, such share issuance was not in any way connected or related to Mr. Gutshall’s previous officer positions with the Company nor his position as a director of the Company.

Employment Agreements

Past Agreements-Daniel Weadock, Chief Executive Officer and Director

On February 20, 2018, the Company also entered into a compensation agreement with Mr. Weadock (the “Director Compensation Agreement”). Pursuant to the terms of the Director Compensation Agreement, the Company agreed to grant Mr. Weadock an aggregate of 240,000 shares of restricted shares of common stock of the Company, consistent with the grant and vesting schedule set forth in the Director Compensation Agreement; provided, however, that no grant will be made and no shares will be issued with respect to any grant, if Mr. Weadock is not a member of the Company’s board of directors on the respective Date of Grant as set forth in the agreement. If the Company is acquired by, or merged into and with, another entity prior to the last Date of Vesting set forth in the agreement (i.e. February 23, 2022), all shares issuable to Mr. Weadock under the Director Compensation Agreement will become fully vested and non-forfeitable. The Company also agreed to reimburse Mr. Weadock for all reasonable travel and incidental expenses incurred by Mr. Weadock in performing his services and attending meetings as approved in advance by the Company.

Additionally, on February20, 2018, the Company entered into an indemnity agreement with Mr. Weadock (the “Weadock Indemnity Agreement”). Pursuant to the terms of the Weadock Indemnity Agreement, the Company agreed to use reasonable efforts to obtain and maintain in full force and effect directors’ and officers’ liability insurance (“D&O Insurance”) in reasonable amounts from established and reputable insurers; provided, however, the Company shall have no obligation to obtain or maintain D&O Insurance if the Company determines in good faith that such insurance is not reasonably available, the premium costs for such insurance are disproportionate to the amount of coverage provided, the coverage is reduced by exclusions so as to provide an insufficient benefit, or Mr. Weadock is covered by similar insurance maintained by a subsidiary of the Company. In addition the foregoing, the Company will indemnify Mr. Weadock from certain third party actions, derivative actions and actions where Mr. Weadock is decreased; provided, however, the Company shall not be obligated to indemnify Mr. Weadock for actions including, but not limited to, actions initiated by Mr. Weadock, for any action in which it is determined that the material assertions made by Mr. Weadock in such proceeding were not made in good faith or were frivolous, for any settlements not authorized by the Company, for any actions on the account of Mr. Weadock’s willful misconduct, and for any expenses and the payment of profits arising from the purchase and sale Mr. Weadock of securities in violation of Section 16(b) of the Securities Exchange Act, or any similar successor statute; provided, further that, that the Company shall not be obligated to indemnify Mr. Weadock for expenses or liabilities of any type whatsoever which have been paid directly to Mr. Weadock pursuant to the Company’s D&O Insurance policy.

Mr. Weadock no longer has an employment agreement.

Rick Gutshall, Former Interim Chief Executive Officer and Current Director

Mr. Gutshall served as our Interim Chief Executive Officer from August 2017 until February 2018 as a member of our Board of Directors since August 2017, and as our Chief Financial Officer from August 2017 to December 2017. On August 9, 2017, the Company entered into a director agreement (the “Gutshall Director Agreement”), employment agreement (the “Gutshall Employment Agreement”) and an indemnity agreement (the “Gutshall Indemnity Agreement”) with Rick Gutshall. The Gutshall Employment Agreement commenced on August 9, 2017.

Pursuant to the terms of the Gutshall Director Agreement, Mr. Gutshall shall serve as a member of the Company’s Board and will receive a stock award in such amount as determined by the Board upon the earlier of (i) 30 days from August 9, 2017 and (ii) the closing of a financing pursuant to which the Company receives a minimum of $500,000 in proceeds. In addition, Mr. Gutshall shall be reimbursed for all reasonable travel and other incidental expenses incurred in the performance of his services, including attendance at meetings, as approved by the Company.

Pursuant to the terms of the Gutshall Employment Agreement, Mr. Gutshall agreed to serve as Interim Chief Executive Officer and Chief Financial Officer of the Company. The initial term of the agreement will expire on August 9, 2018 and commencing on August 9, 2018 and on each anniversary of such date thereafter, the term of the Gutshall Employment Agreement shall automatically renew for one-year periods, unless earlier terminated pursuant to the terms of the Gutshall Employment Agreement. In consideration for Mr. Gutshall’s services, the Board shall determine Mr. Gutshall’s compensation upon the earlier of (i) 30 days from August 9, 2017 and (ii) the closing of a financing pursuant to which the Company receives a minimum of $500,000 in proceeds. On February 20, 2018, Mr. Rick Gutshall resigned as Interim Chief Executive Officer of the Company.

Retirement Benefits

We do not currently provide our named executive officers with supplemental or other retirement benefits.

Outstanding Equity Awards at December 31, 2018

As of December 31, 2018, 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.

The following table sets forth the ownership, as of the this date of our common stock by each person known by us to be the beneficial owner of more than 5% of our outstanding common stock, our director, and our executive officer and director as a group. To the best of our knowledge, the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are no pending or anticipated arrangements that may cause a change in control.

The information presented below regarding beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities. The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with respect to the shares shown. The business address of the shareholders is 7401 W. Slaughter Lane #5078, Austin, Texas 78739.

Name	Number of Shares of Common Stock		Percentage
Thomas Cook		0		0.00	%
Rick Gutshall		758,401		1.73	%
Lang Coleman		1,317,528		3.01	%
All executive officers and directors as a group (3 persons)		2,075,929		4.75	%

5% Stockholders:
-

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 August 8, 2017, in connection with the Alamo Acquisition, Chad Sykes, founder and Chief of Cultivation, returned to the Company 2,500,000 shares of common stock of the Company.

On September 6, 2017, in connection with the Alamo Acquisition, the Company issued 2,957,763 shares of common stock to Dr. Lang Coleman, a Director of the Company.

On September 6, 2017, in connection with the Alamo Acquisition, the Company issued 758,401 shares of common stock to Rick Gutshall, Interim-Chief Executive Office, Chief Financial Officer and Director of 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

Thayer O’Neal Company, LLC was our independent auditor for the years ended December 31, 2017 and December 31, 2018.

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 2018 and 2017.

	2018	2017
Audit fees	$	$	56,190
Audit-related fees			—
Tax fees			—
All other fees			—
Total	$	$	56,190

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.

Item 15. Exhibits, Financial Statement Schedules.

Statements contained above as to the contents of any contract or other document that we have filed as an exhibit hereto, as listed below, are qualified in their entirety by reference to the exhibits for a complete statement of their terms and conditions. The following exhibits are included as part of this Registration Statement by reference:

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).

10.3		Convertible Promissory Note with Tangiers Global, LLC. (Incorporated by reference to exhibit 10.3 in the Registrant’s Form 8-K filed on October 13, 2017).

10.4		Amendment Convertible Promissory Note with Tangiers Global, LLC. (Incorporated by reference to exhibit 10.4 in the Registrant’s Form 8-K filed on October 13, 2017).

10.5		Joint Venture Agreement between Indoor Harvest, Alamo CBD and Vyripharm. (Incorporated by reference to exhibit 10.1 in the Registrant’s Form 8-K filed on March 28, 2017).

10.6		Tangiers 8% Fixed Convertible Promissory Note. (Incorporated by reference to exhibit 10.2 in the Registrant’s Form 8-K filed on March 28, 2017).

10.7		Choo Director Agreement. (Incorporated by reference to exhibit 10.1 in Registrant’s Form 8-K filed on March 13, 2015).

10.8		Zimmerman Director Agreement. (Incorporated by reference to exhibit 10.1 in Registrant’s Form 8-K filed on April 15, 2015).

10.9		Choo Employment Agreement. (Incorporated by reference to exhibit 10.1 in Registrant’s Form 8-K filed on August 14, 2015).

10.10		Rockwell Securities Purchase Agreement dated March 22, 2016. (Incorporated by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on March 24, 2016).

10.11		Rockwell Form of Senior Convertible Promissory Note. (Incorporated by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on March 24, 2016).

10.12		FirstFire Securities Purchase Agreement dated March 22, 2016. (Incorporated by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on March 24, 2016).

10.13		FirstFire Form of Senior Convertible Promissory Note. (Incorporated by reference to exhibits 10.1 – 10.4 in Registrant’s Form 8-K filed on March 24, 2016).

10.14		FirstFire Securities Purchase Agreement dated October 19, 2016. (Incorporated by reference to exhibit 10.1 in the Registrant’s Form 8-K filed on October 21, 2016).

10.15		FirstFire Form of Senior Convertible Promissory Note. (Incorporated by reference to exhibit 10.2 in the Registrant’s Form 8-K filed on October 21, 2016).

10.16		Share Exchange Agreement with Alamo CBD, LLC and the members of Alamo CBD, LLC. (Incorporated by reference to exhibit 10.1 in the Registrant’s Form 8-K filed on April 26, 2017).

10.17		Gutshall Director Agreement dated August 9, 2017. (Incorporated by reference to exhibit 10.1 in the Registrant’s Form 8- K filed on August 14, 2017).

10.18		Gutshall Employment Agreement dated August 9, 2017. (Incorporated by reference to exhibit 10.2 in the Registrant’s Form 8-K filed on August 14, 2017).

10.19		Coleman Director Agreement dated August 9, 2017. (Incorporated by reference to exhibit 10.5 in the Registrant’s Form 8- K filed on August 14, 2017).

10.19		Tangiers 8% Fixed Convertible Promissory Note. (Incorporated by reference to exhibit 10.3 in the Registrant’s Form 8-K filed on January 19, 2017).

10.20		Amendment dated February 13, 2018 to the Convertible Promissory Note issued to Tangiers on January 16, 2018. (Incorporated by reference to exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 20, 2018).

10.21		Executive Employment Agreement dated February 20, 2018 between Indoor Harvest Corp and Daniel Weadock. (Incorporated by reference to exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2018).

10.22		Compensation Agreement dated February 20, 2018 between Indoor Harvest Corp and Daniel Weadock. (Incorporated by reference to exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2018).

10.23		Indemnity Agreement dated February 20, 2018 by and between Indoor Harvest Corp and Daniel Weadock. (Incorporated by reference to exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on February 23, 2018).

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.

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: June 3, 2019	INDOOR HARVEST CORP

	By:	/s/ Thomas Cook
		Thomas Cook
		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	June 3 , 2019
Rick Gutshall

/s/ Dr. Lang Coleman		June 3, 2019
Dr. Lang Coleman

Indoor Harvest (CE) (USOTC:INQD)
Historical Stock Chart
Von Nov 2024 bis Dez 2024

Click Here for more Indoor Harvest (CE) Charts.

Indoor Harvest (CE) (USOTC:INQD)
Historical Stock Chart
Von Dez 2023 bis Dez 2024

Marktdaten

News

Werkzeuge

Märkte

Entdecken

Hot Features

Follow Feed

Optionen-Flow

Watchlist

INQD Indoor Harvest Corp (CE)

News Indoor Harvest Corp

Kürzlich von Ihnen besucht

Unternehmen

Geschäft

Popular

App herunterladen

Trends

Toplisten

Marktdaten

News

Werkzeuge

Märkte

Entdecken

Hot Features

Follow Feed

Optionen-Flow

Watchlist

INQD Indoor Harvest Corp (CE)

News Indoor Harvest Corp

Kürzlich von Ihnen besucht

Unternehmen

Geschäft

Popular

App herunterladen