Indoor Harvest Corp - Annual Report: 2015 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

 

OR

 

(Name of registrant as specified in our charter)

 

 

 

Issuer's telephone number: 713-410-7903.

Securities registered pursuant to Section 12(b) of the Act: None

 

Securities registered pursuant to Section 12(g) of the Act: None

 

 (Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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 ☐

 

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, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

 

 

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

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter:The aggregate market value of the 6,445,281 shares of voting stock held by nonaffiliates of the registrant, computed by reference to the closing price as reported on the OTCQB, as of the last business day of Indoor Harvest's most recently completed second fiscal quarter (June 30, 2015), was $3,415,999.

We have 11,853,361 shares of common stock outstanding as of March 30, 2015.

 

TABLE OF CONTENTS

 

 

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. DESCRIPTION OF BUSINESS

 

 

Indoor Harvest Corp., or the "Company," is a Texas corporation formed on November 23, 2011. Our principal executive office is located at 5300 East Freeway Suite A, Houston, Texas 77020.

 

Indoor Harvest Corp, through its brand name Indoor Harvest®, is a full service, state of the art design-build, engineering, procurement and construction firm for the indoor and vertical farming industry. The company provides production platforms, mechanical systems and complete custom designed build outs for both Controlled Environment Agriculture ("CEA") and Building Integrated Agriculture ("BIA"), tailored to the specific needs of virtually any cultivar.

CEA is the process of manipulating any agricultural technology to allow the farmer an ability to manipulate a crop's environment to desired conditions. Technologies include greenhouse production, hydroponics, aquaculture, aquaponics and aeroponics. Controlled variables may include temperature, lighting, humidity, pH and nutrient analysis.

BIA is the process of locating CEA methods on, or in, mixed use buildings to provide synergy with the buildings infrastructure and the agriculture process. Earliest examples of BIA include the use of hydroponics, aeroponics and aquaponics, where waste heat is captured through the buildings existing heating, ventilation and air conditioning system as well as the combined use of solar, rainwater collection and evaporative systems. Current operating examples include such buildings as Eli Zabar's rooftop greenhouse, The Sun Works Center for Environmental Studies, Gotham Greens, Sky Vegetables, Top Sprouts, Cityscape Farms, Dongtan, Masdar City, AeroFarms, Solar 2, Lufa Farms, BrightFarms, FarmedHere, Green Sense Farms, Green Spirit Farms and Big Box Farms. The term building-integrated agriculture was coined by Dr. Ted Caplow in a paper delivered at the 2007 Passive and Low Energy Cooling Conference in Crete, Greece.

We currently offer a vertical farm racking system with integrated LED lighting. Our vertical farm racking system was designed to be used for both aeroponic and hydroponic layered crop production within a CEA or BIA operation. Our racking system will work with any standard 48" X 96" or 24" X 48" third party flood table or aeroponic system. We also offer patent pending aeroponic fixtures that are compatible with our vertical farm racking system. We offer our vertical farm racking system and aeroponic fixtures for use by both horticulture enthusiasts and commercial operators who seek to utilize vertical farming methods within a controlled indoor environment.

Aeroponics is the process of growing plants in an air or mist environment without the use of soil or an aggregate medium (known as geoponics). Aeroponic culture differs from both conventional hydroponics and in-vitro (plant tissue culture) growing. Unlike hydroponics, which uses water as a growing medium and essential minerals to sustain plant growth, aeroponics is conducted without a growing medium.  Because water is used in aeroponics to transmit nutrients, it is sometimes considered a type of hydroponics.

The Company generates revenue from vertical farm rack system sales, aeroponic fixture sales and design build construction management services. Our products are designed for the production of aeroponic and hydroponic leafy greens, micro-greens, fruiting plants and herbs. Our fixtures and systems can also be adapted for a variety of other uses such as horticulture research, medicinal plant production, pharmaceutical plant production, plant cloning and hardwood propagation.

In addition to these products, the Company also generates revenue from engineering, procurement and construction management services. Engineering, procurement, and construction management (EPCM) is a common form of contracting arrangement for very large infrastructure and facility projects. Under an EPCM arrangement, the client engages the Company to coordinate all design, procurement and construction work to assure that the whole project is completed as required.

There are currently several different growing technologies being deployed in vertical indoor farming operations. The most common of these technologies include the following: nutrient film technology, ebb and flow systems (flood and drain), drip irrigation, water culture systems, raft systems and aeroponic systems. Aeroponics is a method of growing plants in a sealed environment by suspending plant roots in an automated atomized liquid nutrient environment. Hydroponics is a subset of hydroculture and is a method of growing plants using mineral nutrient solutions, in water, without soil.

Initially designed for the production of 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. Our platform has been independently tested and has shown the following benefits over a more traditional hydroponic system:

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Up to a 95% reduction in water usage

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Up to a 70% reduction in fertilizers

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Accelerated growth rate

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Increased plant biomass

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Increased phytochemical content

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Elimination of growing mediums

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Sterile production

The Low Tide VFRack system is designed specifically for flood and drain operation and provides the following benefits:

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Integrated LED lighting

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Open slot face to accommodate unlevel floors

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Plug and play installation

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Reduced installation costs

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Unistrut based platform

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

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Integrated LED lighting

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Open slot face to accommodate unlevel floors

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Plug and play installation

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Reduced installation costs

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Unistrut based platform

In addition to the products above, the Company also offers both design build and engineering, procurement and construction management services. Design-Build ("DB"), or Engineering, Procurement, and Construction Management ("EPCM") are both common forms of contracting arrangement to design, construct and deliver large infrastructure and facility projects. Under a DB/EPCM arrangement, the client would engage the Company to coordinate all design, procurement and construction work to ensure that the whole project is completed as required.

DB/EPCM agreements offer the following benefits:

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Custom design and engineering

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Clear and concise project cost estimates

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Risk assessment

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Pre-construction planning and drawings

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Management of manufacturing and sub-contracting

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General construction management

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Turn key operations

Our two phase DB/EPCM process offers complete design, engineering, procurement and construction services. We discuss with clients their space and crop selections before we offer guidance on production platforms. Our DB/EPCM agreements are designed to begin a risk assessment, production design, including space design if no client side architect is involved. The first phase of a project, also known as the execution phase, which normally follows what is known as a FEED, or Front End Engineering Design phase. The FEED is a basic engineering design used as the basis for the second phase and is required to produce price estimates or a purchase order. The FEED can be divided into separate packages covering different portions of a project and generally requires an upfront deposit to begin. In some cases, the DB/EPCM contract requires us to execute and deliver the project within an agreed time and budget, commonly known as a Lump Sum Turn Key ("LSTK") Contract. In other cases where projects may have many unknown risks, are research and development heavy, or where first-of-its kind equipment is being specified. In these cases, Cost Plus (CP) agreements, which require reimbursement of expenses plus a percent for profit, may be used to spread risk to the client.

Once Phase One design work is complete, we deliver the client a manufacturing and construction estimate and plans. Phase Two includes construction and construction management services. Under a phase two DB/EPCM agreement, our engineers provide detailed engineering design of the project, procure all the equipment and materials necessary, and then construct to deliver a functioning facility or asset to the client. Our platform architects, engineers and project managers examine every aspect of a potential build-out (or upgrade from a legacy platform). We design for a clients crop selection using various hydroponic production methods with a specialty in High Pressure Aeroponic systems. We rigorously test every individual system component (whether designed by us or by one of our technology partners) in our Texas-based R&D facility.

We are able to provide financing for our products and services to qualified clients under an agreement with Noesis, a leading financing provider for sellers of commercial building improvements. Noesis is the chosen financing partner for over 200 industry-leading companies who collectively sell billions of dollars of equipment and services annually. Noesis provides specialized financing with online sales tools to help business grow. Under our agreement with Noesis, we are able to provide qualified clients with the following options:

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6 Months, No Interest, No Payments. Ideal for short term financing. For customers that want to pay off the lease within 6 months at 0% financing costs through the proceeds of their sales.

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6 months, No Payment. Deferred Payments, save cash now and not make a payment until month 7.

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Term Contracts. Lock in a low interest rate and minimize borrowing costs.

On September 18, 2013, the Company entered into a material transfer agreement with the Massachusetts Institute of Technology's Media Lab ("MIT Media Lab") to provide aeroponic system components and fixtures to be used for the purpose of developing a wall facade aeroponic system as part of MIT Media Lab's Changing Places research. The project, MITCityFarm, will focus on urban mobility networks, decentralized energy infrastructure and transformable housing units to advance urban agricultural systems. Indoor Harvest, Corp. will be responsible for providing technical assistance and materials as a "Technical Systems Adviser" to the MITCityFarm project. This is a demonstration project only. The equipment may only be used for education or not for profit purposes.  The Agreement provides that we are providing our equipment at no cost.

On February 20, 2014, we entered into a 62 month lease with Daniel R. Davis, commencing on March 1, 2014 through April 30, 2019, for a total of 10,000 sqft. of warehouse and office space located at 5300A East Freeway, Houston, Texas 77020. 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. On March 1, 2014, we relocated our equipment to this leased space and ceased operations at our original research and development facility.

On December 18, 2014, the Company entered into a Cannabis Production Pilot Agreement with Canopy Growth Corporation (formerly Tweed Marijuana Inc.), a Canadian company. Canopy Growth Corporation ("Canopy Growth") is a TSX Venture Exchange listed company. Its wholly owned subsidiaries Tweed Inc., Tweed Farms Inc. (formerly Prime1 Construction Services Corp.) and Bedrocan Canada 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.

Set forth below is a brief description of the terms and conditions of the Agreement that are material to Indoor Harvest:

The Pilot Project will test the production of Cannabis using an aeroponics system designed by Indoor Harvest. The Pilot Project will make a record of the growth rate, phytocannabinoid production, water usage, fertilizer usage and labor using the aeroponics system(s) provided by Indoor Harvest. The recorded data from the Pilot Project will be compared to Tweed's existing production methods. At the conclusion of the Pilot Project, upon review of the data, Canopy Growth and Indoor Harvest shall jointly secure intellectual property rights for the resulting aeroponics system(s) (at each Party's discretion as to whether they wish to participate in intellectual property filings) and Indoor Harvest will be provided manufacturing rights.

The Pilot Project is broken into two separate phases, as follows:

 

Indoor Harvest will be responsible for providing all the equipment related to the aeroponics system being tested, to include a temporary partitioned testing lab structure to be used within Canopy Growth's existing facilities and the cost associated with delivery and installation of the aeroponics system and testing lab, including design changes and subsequent changes based on feedback from Phase One testing.

Canopy Growth will be responsible for providing adequate space in a Controlled Environment for testing purposes to include water service, local area drain and electrical service. Canopy Growth will also provide the personnel and labor to operate and maintain the equipment provided by Indoor Harvest. Canopy Growth will make a reasonable effort to provide Indoor Harvest with weekly updates to include photographs of the plants being grown and their root development as well as all associated data required under the Agreement.

The Pilot Project shall be conducted for a period (the "Pilot Period") commencing on the date of this Agreement (the "Commencement Date") and ending (the "Termination Date") upon the earlier of (a) the parties' mutual determination that the Pilot Criteria has been satisfied or (b) one year after the Commencement Date.  This agreement can be extended if both parties mutually agree in writing.

Upon completion of the Pilot Project, Indoor Harvest and Canopy Growth will jointly apply for patents ("New IP") on the technology developed under the Pilot Agreement. Canopy Growth will be provided exclusive rights to cultivate cannabis using the New IP in Canada and other jurisdictions outside the United States, at a royalty-free rate for the duration of the patent (including any extension of the patent). Indoor Harvest will have exclusive royalty-free rights to cultivate cannabis using the New IP in the United States for the duration of the patent (including any extension of the patent) and will be provided rights to use the New IP in all jurisdictions, royalty-free, for the cultivation of all other species of cultivars, to specifically exclude cultivation of cannabis using the New IP. Indoor Harvest will only have rights to cultivate cannabis in the United States using the New IP. All of these rights are intended to be for commercial production of cultivars.

Indoor Harvest will be provided exclusive manufacturing rights for a period of 10 years on the New IP developed under the agreement. All equipment manufactured by Indoor Harvest will be provided to Canopy Growth by way of a "cost plus agreement" not to exceed 15% allowable for profit.

 

Both parties are responsible for the costs associated with meeting their obligations outlined in this Agreement. Under no circumstance, do Canopy Growth's costs exceed those associated with the cost of plants, labor and general costs of production including water and electricity. However, any costs related to third party laboratory analysis and testing of phytocannabinoids will be shared equally by both parties.

On March 31, 2015 the Company signed a LOI with the City of Pasadena, Texas to fund the establishment and provisioning of an indoor agricultural facility (vertical farm) to be located in Pasadena, Texas. Under the LOI, the City was to provide Indoor Harvest, or a partner of their designation with City approval, with two facilities owned by the City for the sum of ten dollars ($10.00) per annum for a period not to exceed twenty (20) years as well as provide tax abatements on these properties for use in the construction of a Community Located Agricultural Research Area ("CLARA") project. In addition, the Pasadena Second Century Corp. (economic development entity for the City of Pasadena) has been asked by City officials to consider a budgetary proposal of $500,000 as seed money for the project's economic development portion in north Pasadena.

The CLARA project is expected to be divided into two phases. Phase One will focus on developing the non-profit aspects of the project and is envisioned to include the construction of a 6,000 sq. ft. vertical farm R&D facility and 6,000 sq. ft. of classroom and office space. Phase Two is envisioned to support a commercial retail operation on approximately two acres of land and additional properties adjacent to the vertical farm and education centers.

The Phase One vertical farm facility is intended to serve dual roles, with Indoor Harvest using the facility as a demonstration farm and R&D facility and Harris County BUILD Partnership, a non-profit group, using the facility for educational and charitable purposes. It is anticipated that the crops grown will be donated, or sold at cost, to provide fresh produce to low income families in the North Pasadena area. The entire proposed campus area, almost two city blocks, will be designed and built to allow the flow of tourists without impacting operations. A project overview was presented in August to department heads at the Pasadena Independent School District's Kirk Lewis Career & Technical High School and the Continuing and Professional Development Department of San Jacinto College regarding academic curriculum development to be located at the CLARA campus.

Phase Two of the project is anticipated to be developed on two acres of land and additional buildings currently available adjacent to the existing properties being provided by the City. Indoor Harvest, as the primary developer of the campus, expects to be able to provide commercial operators who build on the CLARA campus a unique group of incentives and key advantages in regards to distribution, manufacturing intelligence and access to resourcing and key agricultural production talent. The City of Pasadena is currently working to secure additional land surrounding the CLARA campus for use by commercial partners.

In addition, City officials are currently considering creating a tax increment reinvestment zone (TIRZ) in the immediate area surrounding the CLARA campus.  A TIRZ is a public financing structure that Texas law allows to target tax revenue helping to support redevelopment in underserved areas. Such a zone, if created, could provide an additional economic incentive for tangential services to locate on the project site. As of now, the City is not obligated to create a TIRZ zone and no such zone may ever come to fruition.

On April 15, 2015, the Company signed a LOI with PUE 1.0. Under the terms of the letter of intent, it is anticipated that a final agreement will include the following terms:  Indoor Harvest will be responsible for the design of a vertical farming system and its related systems. PUE 1.0 will be responsible for the design of a HVAC system to be used with Indoor Harvest's vertical farming design. Both parties have agreed to share any data during the development stage. PUE 1.0 will retain all rights to its intellectual property and any new intellectual property developed as part of the collaboration. Indoor Harvest will be provided exclusive rights to market and distribute the final design for a period to be determined by way of a memorandum of understanding, to be finalized in connection with the closing of terms outlined in our letter of intent with the City of Pasadena. During the development stage, all equipment to be provided by PUE 1.0 for the purpose of the technology and economic pilot to be constructed at the 112 N Walter property will be provided at cost.

On December 17, 2015 we entered into a design partnership with Freight Farms to jointly explore new cultivar platforms. Freight Farms, makers of the Leafy Green Machine shipping container farms, will leverage Indoor Harvest’s unique expertise as the leading design-build firm of indoor farms to explore innovative new applications for its Leafy Green Machine. Freight Farms launched in 2010 to create a more sustainable and connected food system by creating highly sustainable farms in shipping containers. To date, there are more than 108 farmers across the United States and Canada utilizing Freight Farms to bring fresh, local produce directly into their communities. Currently, the farms can be used to grow varieties of lettuces, brassicas and herbs.

The companies will work together to explore how Freight Farms’ containerized approach to indoor farming could be deployed in new ways to reach into untapped markets, including those internationally, as well as applications for non-profits and pharmaceutical research. Freight Farms is already deployed by academic institutions, restaurants, wholesale produce distributors and small business owners.

 

On January 27, 2016 the Company entered into a Memorandum of Agreement ("MOA") with IGES Canada Ltd. ("IGESCA"), a Canadian company that is a technology solution integrator in the vertical farming market. The MOA sets forth terms for a relationship between the Company and IGESCA to grow, market and sell vertical farming solutions globally.

Subject to the terms of the MOU,  IGESCA and Indoor Harvest  agree to partner to market and sell  Indoor Harvest's solutions in conjunction with the IGESCA business platform to clients globally. Our responsibilities include Delivering Turnkey Engineering, Procurement and Construction (EPC) solutions for CEA facilities, ongoing support and access to financing options through Noesis for designated projects. The responsibilities of IGESCA include identifying new and concluding project engagements from the current potential portfolio of 15 facilities, ongoing operations and regulatory navigation.

Both Indoor Harvest and IGESCA agree that any intellectual property, which is jointly developed and filed through activities covered under this MOA, can be used by either party for sales/marketing purposes with the consent of the other party which can be set forth in initial guidance. All other intellectual property used in the implementation of the MOA will remain the property of the party that provided it. This property can be used by either party for purposes covered by the MOA but consent will be obtained from the owner of the property before using it for purposes not covered by the MOA. The MOA shall remain in effect for a period of three (3) years from that date signing unless earlier terminated.

From September 18, 2012 through October 31, 2012, we completed an initial prototype system test by growing 110 basil plants. The test resulted in an average 1.7 lbs of basil per square foot in 30 days using under 2 gallons of water per plant drain to waste. Upon completion of the test, we made design changes to our lid system and nutrient dispensing system prototypes.

From March 8, 2013 through April 8, 2013, we completed a second prototype system test by growing 110 heads of leafy lettuce to include three types of lettuce, bibb lettuce, buttercrunch lettuce and romaine lettuce. The test resulted in an average head weight of 1/4 lbs in 28 days and water use of under 3 gallons per head drain to waste. Upon completion of the test, we made design changes to our lighting system, updated the framing system and put two prototype grow trays into vertical operation.

From July 13, 2013 through August 22, 2013, we completed a third prototype system test by growing 220 heads of leafy lettuce to include four types of lettuce, bibb lettuce, buttercrunch lettuce, romaine lettuce and ruby red lettuce. The test resulted in average head weight of 1/4 lbs in 30 days and 1/2 lbs in 40 days. During this period the Company also conducted research and development of lighting and controls, comparing the performance of LED lighting and T5 fluorescent lighting. Also during this period the Company tested its second nutrient dispensing prototype running two vertically stacked grow trays simultaneously.

In January 2015, we began construction of a controlled environment testing facility. The facility will be used to test production yields for a variety of cultivars using both our aeroponic and vertical farm framing designs. This data will then be used to develop business plans and marketing materials for our product and services. As of the date of this report, we had completed the walls and partitions, area drainage and flooring. We expect to begin installing the ventilation, climate controls and research platforms in the third quarter of 2016.

From February 19 through March 7, 2015, the Company completed installation of three mobile research labs at Canopy Growth's, subsidiary Tweed located in Smith Falls Canada per a Cannabis Production Pilot Agreement between the two Companies.

The initial Cannabis Production Pilot took place between March and August 2015. A sativa dominant strain, Ghost Train Haze, was selected and 8 plants were grown in a 4' X 8' X 2' system using a "Screen of Green" cultivation method, in which plants are cropped and trained to produce a higher yield from a single plant. The Company's patent pending aeroponic system showed a significant increase in growth rate during the vegetative stage, as compared to more traditional production methods such as drip irrigation using coco.

Fertilizer usage was reduced by as much as 68% over Canopy Growth's existing production with the aeroponic system averaging 8 gallons a day under high pressure sodium and 9 gallons a day under LED, operating drain to waste. As tuning of the system progressed, average water use was reduced to approximately 5 gallons per day drain to waste. The Company believes that through additional tuning, more water savings for drain to waste and under recirculated operation can be achieved, and water use could be reduced by as much as 98% overall. Under 2,000 watts of high-pressure sodium lighting, the aeroponic system produced 3.1 pounds of dried flowers and under 1,040 watts of LED lighting produced 2.8 pounds of dried flowers in its initial test. The Company believes that with additional tuning, yield can be increased.

On September 28, 2015, the Company and Canopy Growth mutually agreed to extend collaborative research and development for an additional two years.

On December 10, 2015, we began a second pilot under our Cannabis Production Pilot Agreement with Canopy Growth. The results from this second pilot are expected on or before April 30, 2016.

 

Commercial Growers - Commercial agriculture is beginning to migrate to CEA and BIA. We believe that our products and services provide an affordable vertical farming and turn-key facility solutions for urban commercial growers who produce for local restaurants, hotels, wholesale and retail markets. Our systems can also be used in re-forestation projects or other revitalization projects through the system's ability to clone and propagate a variety of plant cuttings and hardwood cuttings.

Horticulture Researchers - The modular nature of our system design and custom fabrication abilities allow for numerous configurations from the same system. Our platform provides a variety of aeroponic delivery methods and plant support structures from the same system. This provides maximum flexibility to researchers who are experimenting with different plant species and are attempting to keep costs down.

Currently, our potential client base is nearly evenly split, with 44% in Cannabis and 56% in edible produce production. We believe that cannabis has the potential to be a large market for our equipment. We are currently developing and offering products which could be specifically used in the production of cannabis under our agreement with Canopy Growth in Canada, where cannabis is legal throughout the country. We will only directly enter that market outside the U.S. where cannabis is legal, such as in Canada, and in the U.S. only in jurisdictions where cannabis is legal and only then if we do not believe there is any material likelihood that we could be found in violation of federal law in the U. S. through the sale of our products.  See "Government Regulation and Certification," below.

 

The company intends to offer its products to B2B  clients, through authorized dealer groups and resellers, as well as offering direct commercial sales and design-build, engineering, procurement and construction services from our website. As of the date of this filing, we have one oral agreement with a distributor and four written agreements with B2B clients. We are currently developing our marketing plan, which may include some or all of the following marketing methods:

Direct Mail - The use of direct mail allows us to reach a wide audience within a targeted market. A direct mail campaign may consist of a letter of introduction and a brochure featuring the products and services provided by the Company.

Internet Marketing - The Company intends to utilize social networks such as YouTube and Facebook as well as reaching out to industry bloggers and news sites in order to reach potential customers. The company can also sponsor, or advertise with hydroponic and other related horticulture online forums, social networks and online magazines. The Company, in the future, plans to offer its products for sale via the internet.

The company intends to launch a social media network under the domain name aerofarmer.com. The company intends to host forums, articles and blogs related specifically to aeroponic indoor farming while also offering a retail sales point for its products and services.

Trade Shows and Special Events - The Company intends to participate in industry trade shows and events in order to create market awareness for its products and services.

We intend to market our products to customers desiring to grow all varieties of agricultural products. We do not intend to exclude the growers of any agricultural products, including cannabis, from our marketing efforts. As of the date of this report, we are developing and offering fixtures specifically for cannabis production in Canada under our agreement with Canopy Growth. All of our current fixtures can be adapted for use by cannabis growers. In the future we may develop additional fixtures, or be contracted to design additional systems, specifically for cannabis production. Marketing our products in the U.S. in state and local jurisdictions where marijuana is legal is still uncertain due to the uncertain legal status of the growth, sale and use of cannabis due to conflicting laws under which what is illegal federally is to varying extents legal under certain state laws to the contrary [and even greater uncertainty as to what would constitute ancillary illegal activities such as aiding or abetting if any such direct actions are deemed illegal; and even if direct illegality laws were enforced, whether any ancillary related laws such as aiding and abetting would, if ever, be enforced]. We believe that if the cannabis industry were to become fully legal under both U.S. federal and state law, then this industry may well be where the most advances in technology related to our products could come from. We are also working on developing cannabis-specific products in Canada under our agreement with Canopy Growth.  Thus, it is not unreasonable, but is not certain, to assume that the cannabis industry will become the biggest market for the type of equipment that we manufacture.

  

The vertical farming industry is estimated to reach $3.88 Billion by 2020, at a CAGR of 30.7% between 2015 and 2020 based on a report by MarketsandMarkets, the world's No. 2 firm in terms of annually published premium market research reports. There are several Companies operating vertical farms that are offering licensing and franchises based on proprietary systems and production methods. These Companies include Aerofarms, Truleaf, FarmedHere, UrbanBarns, Green Sense Farms and Green Spirit Farms. These Companies offer a turn-key platform and operation. We believe that this approach limits a clients options and burdens them with licensing and branding restrictions. We approach every client as an individual project and are able to offer a wide range of technologies and production methods. It is imperative that these competitors maintain control over production data to justify licensing. We believe the industry is moving towards open data and open source technologies that will reduce the advantage of individual licensing of production methods and platforms. We believe our design-build approach and utilization of open data of production and flexibility in system design provides us a competitive advantage.

There are two main manufacturers that currently manufacture high pressure aeroponic systems. They are Agrihouse™ and Aerofarms™. These companies are currently engaged in the manufacture and sales of commercial aeroponic vertical farming systems. These systems can only be used in a single mode with high pressure aeroponics and offer limited sizing options. Our system is capable of operating in dual modes, both LPA and HPA, and our AGT fixture is available in optional sizes that our competitors currently do not offer. There are also companies such as general Hydroponics® and Botanicare® that manufacture aeroponic and hydroponic growing systems for the hobbyist. These systems are only available in low pressure aeroponics and require individual reservoirs. They also are offered in limited sizes and are not designed for vertical operation. These systems only provide a single mode of operation.

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 vertical farming platform. Instead of relying on a complete engineered system, we have developed individual fixtures that can be used in whole, or in part, to create a variety of modular vertical farming systems of any scale, or size. By breaking our platform down into individual, independent fixtures, we offer a level of custom ability that currently is not offered by our competitors.

Our fixtures can be used individually, or incorporated into do-it-yourself designed systems that many smaller commercial operators chose to build. This allows us to not only compete for sales to commercial growers who are developing their own systems, but also with growers who are looking for a complete system. We believe this will allow us to increases our market share and allows us to benefit from both commercial and retail sales. When combined with our engineering, procurement and construction management services, we can offer custom, turn-key facilities.

 

Design-Build, EPCM Agreements

 

We will source our products and accessories from third party manufacturing companies that manufacture products in part using tooling we own, in accordance with our specifications, and subject to our patent pending intellectual property rights.

 

We currently own tooling to produce HDPE aeroponic trays in 48"X96"X12" and 48"X96"X24" sizes through a process known as rotational molding and thermoforming. We also own tooling to produce thermoformed molds in 24"X48" for ABS plastic. We currently out-source our rotational molding to Freeman Engineered Products and thermoforming to Robinson Industries. We are currently capable of manufacturing our VFRack framing systems in-house, though we may choose to sub contract to third parties depending on project location and number of fixtures purchased. We currently have no agreements with third parties to manufacture our products. We are capable of producing up to 800 frames per month currently in -house.

All of our products and fixtures are made using very common fabrication and manufacturing methods. We have access to numerous companies around the world that offer metal fabrication, powder coating and plastic thermoforming and rotational molding. We contract and source from companies based on geographic location and volume ability. We can transport our tooling from one manufacturer to another and in some cases we contract to have new tooling built depending on the volume of a clients order. Because we use common manufacturing methods and because our products are designed with these common manufacturing methods in mind, we are able to meet any scale or project size. Any volume limits or lead times based on available manufacturing is discussed with the client during the design phase and pricing phase. The capacity limits are those of our suppliers and manufacturers, not of ours. So if we have more orders than these suppliers and manufactures can supply parts and/or complete third party manufacturing in any month, we will advise our client of a delay in the delivery time. 

We rely on 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.

On December 6, 2011, a U.S. federal trademark registration was filed for Indoor Harvest (Serial Number 85488194) and the United States Patent and Trademark Office ("USPTO") granted a first 6 month extension for use on January 5, 2013 and were granted a fifth extension for use on January 8, 2015. On August 18, 2015 we registered Indoor Harvest as a trademark for use.

On May 15, 2013 the Company filed a provisional application for patent on a "modular aeroponic system and related methods" (Serial Number 61/823,330) with the USPTO. The inventor was recorded as Chad Sykes, our CEO and sole Founder and Indoor Harvest Corp was named as the assignee. In order to obtain our patent, the Company will need to convert its provisional application for patent, into a non-provisional application for patent. On May 15, 2014, the Company converted its provisional patent into a non-provisional patent and recorded an expense of $1,730.

On September 22, 2015, we received our first office action from the USPTO. We have responded to comments on our patent application and await a response from the USTPO. We do not currently have a patent, the USPTO will conduct a further review of our patent application and provide us with comments. We must satisfy all comments before the USPTO will grant us a patent. There is no guarantee that a patent will be granted. While our patent application is under review, we may use the term "patent pending" on all published materials regarding our process applied for patent.

 

We are not aware of any governmental regulations or approvals for any of our products or services.

 

As the possession and use of cannabis is illegal under the Federal Controlled Substances Act, we could be deemed to be aiding and abetting illegal activities through the equipment we intend to sell in the U.S. if such equipment is used by customers who intend to purchase and use our aeroponic and vertical farm framing systems to grow cannabis. Under Federal law, and more specifically the Federal Controlled Substances Act, 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. 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). However, we do not believe that the Company's current and intended business as described in this report violates federal law and believe we would prevail if any such action were brought against us.

 

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. You may read and copy any document we file at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. Our filings are also available, at no charge, to the public at  http://www.sec.gov .

 

Item 2. Description of Property

On February 20, 2014, we entered into a 62 month lease with Daniel R. Davis, commencing on March 1, 2014 through April 30, 2019, for a total of 10,000 sqft. of warehouse and office space located at 5300A East Freeway, Houston, Texas 77020. 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.

 

Item 3. Legal Proceedings

We are not a party to any material legal proceedings nor are we aware of any circumstance that may reasonably lead any third party to initiate material legal proceedings against us.

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. 

Our common stock has an Over-The-Counter Market symbol of "INQD" and currently trades on the OTCQB. The following table sets forth, for the quarters indicated, the high and low closing sales prices per share for the Company's common stock as reported on the OTCQB. The Company began trading on the OTCQB on February 27, 2015.

On March 24, 2016, the closing bid price on the OTC Markets Group, Inc.’s OTCQB tier for our Common Stock was $0.36.

We have never declared or paid any cash dividends on our common stock. For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Any future determination to pay dividends will be at the discretion of the Board of Directors and will be dependent upon then existing conditions, including our financial condition and results of operations, capital requirements, contractual restrictions, business prospects and other factors that the Board of Directors considers 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:

 

 

October 15, 2015, the Company issued 300,000 shares of common stock to one U.S. accredited investor at $0.50 per share for cash totaling $150,000.

In November 17, 2015 the Company issued 125,000 shares of Common stock to the Company's legal counsel as part of legal fees with a fair value of $56,250 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On December 1, 2015, the Company issued 7,063 shares of Common Stock for consulting expense with a fair value of $3,178 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On December 7, 2015, the Company issued 125,000 shares of Common Stock to FMW Media Works, Inc. in order to provide investor and public relations services. The Company recorded a fair value of $47,500 ($0.38/share) based upon the most recent trading price per share of the Company’s stock.

On January 17, 2016, the Company issued 20,820 shares of Common Stock related to a Director Agreement with John Zimmerman, of common stock with a fair value of $9,369 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On January 19, 2016, we issued 300,000 shares of Common Stock to Kodiak Capital Group, LLC as a commitment fee for a Two Million Dollar Equity Financing Agreement. The Company recorded a fair value of $120,000 ($0.40/share) based upon the most recent trading price per share of the Company’s stock. The Company is subject to a Registration Rights Agreement which requires the Company to file a S1 Registration Statement with the SEC by March 31, 2016 and must receive a notice of effectiveness from the SEC prior to executing a Put Notice. The Purchase Price of the security is based on 80% of the Market Price based on the Put Date. Market price is calculated on the lowest daily volume weight average price for any trading day during the valuation period, which is the five days from the Put Notice to the Put Date.

On January 22, 2016, we issued 125,000 shares of Common Stock to Emerging Growth, LLC, to provide investor and public relations services. The Company recorded a fair value of $43,750 ($0.35/share) based upon the most recent trading price per share of the Company’s stock.

 

On February 29, 2016, we issued 41,640 shares of Common Stock related to a Director Agreement with John Choo and William Jamieson. The Company recorded fair value of $14,574 ($0.35/share) based upon the most recent trading price per share of the Company’s stock.

On March 14, 2016, we issued 11,330 shares to a consultant for services rendered, of common stock with a fair value of $4,986 ($0.44/share) based upon the most recent trading price per share of the Company’s stock.

On March 22, 2016 the Company entered into a securities purchase agreement with Firstfire Global Opportunities Fund, LLC, and Rockwell Capital Partners Inc, relating to the issuance and sale of notes of $272,500 in aggregate principal amount including $250,000 actual payment of purchase price plus a 9% original issue discount, and an aggregate total of 50,000 shares of common stock valued at $23,500 ($0.47/share). The notes carry an interest on the unpaid principal amount at the rate of 3% per annum. Any Principal Amount or Interest which is not paid when due shall bear interest at the rate of 15% per annum from the due date until the same is paid. The notes mature on September 22, 2016 and may be prepaid in whole or in part except otherwise explicitly set forth in the Note. If the Company exercises its right to prepay or repay the Note, the Company shall make payment to the note holders of an amount in cash equal to the sum of 125% multiplied by the Principal Amount plus accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date plus Default Interest, if any. the notes convert into shares of Common Stock at a price equal to $0.30; provided, however that from and after the occurrence of any Event of Default hereunder, the Conversion Price shall be the lower of: (i) the Fixed Conversion Price or (ii) 45% multiplied by the lowest sales price of the Common Stock in a public market during the ten (10) consecutive Trading Day period immediately preceding the Trading Day that the Company receives a Notice of Conversion (as defined in the Note).

On March 23, 2016 the Company issued 100,000 shares of common stock to one U.S. accredited investor at $0.50 per share for cash totaling $50,000.

We relied upon Section 4(2) of the Securities Act of 1933, as amended for the above issuances to US citizens or residents. We believed that Section 4(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.

On January 21, 2015 we filed a 2015 Stock Incentive Plan on Form S-8 with the SEC. Under the plan we were authorized to issue up to 980,000 shares of common stock to employees and consultants. As of December 31, 2015, we issued 272,600 shares of common stock to 10 individuals who were employees or consultants to the Company.

 

Item 6. Selected Financial Data

 

Not required.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-K.

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. Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. 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 Form 10-K.

 

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.

Although the forward-looking statements in this Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. 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 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.

Indoor Harvest Corp, through its brand name Indoor Harvest®, is a full service, state of the art design-build, engineering, procurement and construction firm for the indoor and vertical farming industry. The company provides production platforms, mechanical systems and complete custom designed build outs for both Controlled Environment Agriculture ("CEA") and Building Integrated Agriculture ("BIA"), tailored to the specific needs of virtually any cultivar.

CEA is the process of manipulating any agricultural technology to allow the farmer an ability to manipulate a crop's environment to desired conditions. Technologies include greenhouse production, hydroponics, aquaculture, aquaponics and aeroponics. Controlled variables may include temperature, lighting, humidity, pH and nutrient analysis.

BIA is the process of locating CEA methods on, or in, mixed use buildings to provide synergy with the buildings infrastructure and the agriculture process. Earliest examples of BIA include the use of hydroponics, aeroponics and aquaponics, where waste heat is captured through the buildings existing heating, ventilation and air conditioning system as well as the combined use of solar, rainwater collection and evaporative systems. Current operating examples include such buildings as Eli Zabar's rooftop greenhouse, The Sun Works Center for Environmental Studies, Gotham Greens, Sky Vegetables, Top Sprouts, Cityscape Farms, Dongtan, Masdar City, AeroFarms, Solar 2, Lufa Farms, BrightFarms, FarmedHere, Green Sense Farms, Green Spirit Farms and Big Box Farms. The term building-integrated agriculture was coined by Dr. Ted Caplow in a paper delivered at the 2007 Passive and Low Energy Cooling Conference in Crete, Greece.

We currently offer a vertical farm racking system with integrated LED lighting. Our vertical farm racking system was designed to be used for both aeroponic and hydroponic layered crop production within a CEA or BIA operation. Our racking system will work with any standard 48" X 96" or 24" X 48" third party flood table or aeroponic system. We also offer patent pending aeroponic fixtures that are compatible with our vertical farm racking system. We offer our vertical farm racking system and aeroponic fixtures for use by both horticulture enthusiasts and commercial operators who seek to utilize vertical farming methods within a controlled indoor environment.

Aeroponics is the process of growing plants in an air or mist environment without the use of soil or an aggregate medium (known as geoponics). Aeroponic culture differs from both conventional hydroponics and in-vitro (plant tissue culture) growing. Unlike hydroponics, which uses water as a growing medium and essential minerals to sustain plant growth, aeroponics is conducted without a growing medium.  Because water is used in aeroponics to transmit nutrients, it is sometimes considered a type of hydroponics.

The Company generates revenue from vertical farm rack system sales, aeroponic fixture sales and design build construction management services. Our products are designed for the production of aeroponic and hydroponic leafy greens, micro-greens, fruiting plants and herbs. Our fixtures and systems can also be adapted for a variety of other uses such as horticulture research, medicinal plant production, pharmaceutical plant production, plant cloning and hardwood propagation.

In addition to these products, the Company also generates revenue from engineering, procurement and construction management services. Engineering, procurement, and construction management" (EPCM) is a common form of contracting arrangement for very large infrastructure and facility projects. Under an EPCM arrangement, the client would engage the Company to coordinate all design, procurement and construction work to ensure that the whole project is completed as required.

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 U.S. Securities and Exchange Commission's (SEC's) reporting and disclosure rules (See "Emerging Growth Companies" section above). 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. As a result 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 line of productions, developing our in-house manufacturing and fabrication facilities and the costs related to being a fully reporting company with the Securities and Exchange Commission.

 

Design-Build, EPCM Agreements

 

 

For the fiscal year ended December 31, 2015 we generated revenue of $89,200 with cost of sales of $64,668 resulting in gross income of $24,532. We did not generate any revenue as of December 31, 2014.

For the fiscal year ended December 31, 2015 and December 31, 2014, we incurred $1,279,597 and $443,541, respectively, in operating expenses. The increase in our operating expenses are due to increases in costs related to additional payroll costs, building lease, increased operational activities and professional expenses related to being a publicly traded Company.

Our expenses related to research and development for the fiscal year ended December 31, 2015 and December 31, 2014 were $20,518 and $36,080, respectively. The decrease in research and development expenses was due to decreased costs associated with our collaborative R&D partnerships, in which we share some costs associated with R&D with our partners.

As of December 31, 2015 we had total liabilities of $110,147, while at December 31, 2014, we had total liabilities of $21,245. The increase was the result of accrued payroll expenses from hiring new employees, accounts payable and accrued expenses, billings in excess of costs and estimated earnings, and deferred rent on our building lease.

Deferred rent payable at December 31, 2015 was $9,778. 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.

As of December 31, 2015, we had $168,804 in total current assets. We had current liabilities of $76,885 as of December 31, 2015. Accordingly, we had a working capital deficit of $91,919 as of December 31, 2015.

Operating activities used $704,230 in cash for the year ended December 31, 2015, as compared with $411,335 used for the year ended December 31, 2014. Our negative operating cash flow for the year ended July 31, 2015 was mainly a result of our net loss for the period, offset by the effects of depreciation, loss on the sale of the asset, stock issued for services, increase in accounts receivable, inventory and prepaid expense, the increase in accounts payable and accrued liabilities and decrease in costs and estimated earnings in excess of billings for the ongoing projects, decrease in accrued compensation and a decrease in deferred rent.

Investing activities for the year ended December 31, 2015 used $67,795 in cash, as compared with using $163,763 for the year ended December 31, 2014.

Financing activities for the year ended December 31, 2015 generated $461,262 in cash, as compared with $864,750 for the year ended December 31, 2014. Proceeds from financing activities consisted primarily of proceeds from issuance of common stock for cash.

 

 

On January 30, 2016, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) and a Registration Rights Agreement (the “Registration Rights Agreement”) with Kodiak Capital Group, LLC (the “Purchaser”). Under the Purchase Agreement, the Company shall issue and sell to the Purchaser a number of shares of its common stock, par value $0.001 per share (“Common Stock”) at a purchase price equal to the Maximum Commitment Amount (as defined in the Purchase Agreement) of $2,000,000 (the “Put Shares”). In accordance with the Registration Rights Agreement, the Company has agreed to file a registration statement on Form S-1 by March 31, 2016 (the “Registration Statement”) to register for resale the Put Shares of Common Stock that may be issued under the Purchase Agreement.

Pursuant to the Purchase Agreement, from the date that the Securities and Exchange Commission has declared the Registration Statement effective (the “Effective Date”) until the one year anniversary thereof, the Company has the right to sell, from time to time, up to an aggregate of $2,000,000 Put Shares of Common Stock to the Purchaser. The Company will control the timing and amount of future sales, if any. The purchase price of the Put Shares will be equal to 80% of the lowest closing bid price of the Common Stock for any trading day during the five consecutive trading days immediately following the date of the Company’s notice to the Purchaser requesting the purchase. If during the Valuation Period, the Purchase Price falls below $0.50, the Investor may elect to purchase all, or any portion thereof, of the Put Shares for $0.50.

On February 27, 2016, the Company suspended its private placement under Regulation D, Rule 506(c) for up to 5,000,000 shares of Series A Convertible Preferred Stock at a price of $1.00 per share for maximum gross proceeds of $5,000,000 due to unfavorable market conditions. The Company also terminated its relationship with WealthForge, the broker-dealer retained to manage the offering. The Company is now exploring alternative financing for CLARA through grant funding, through the use of our Kodiak Capital Group Equity Purchase Agreement, or through other funding sources.

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

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Indoor Harvest Corp

We have audited the accompanying financial statements of Indoor Harvest Corp, which comprise the balance sheets as of December 31, 2015 and 2014, and the related statements of operations, changes in shareholders' equity and cash flows for the years then ended, and the related notes to the financial statements. Indoor Harvest Corp's management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Indoor Harvest Corp as of December 31, 2015 and 2014, and the results of its operations and its cash flows for the years ended December 31, 2015 and 2014 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that Indoor Harvest Corp will continue as a going concern. As discussed in Note 2 to the financial statements, the Company's significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to that matter.

/S/ Thayer O’Neal Company, LLC

Thayer O’Neal Company, LLC

Sugar Land, TX

March 23, 2016

 

 

 

 

The Accompanying Notes are an Integral Part of these Financial Statements

INDOOR HARVEST CORP
STATEMENTS OF OPERATIONS
December 31, 2015 and 2014

		2015				2014
Revenues		$	89,200			$	-
Cost of Sales			64,668				-
Gross Income			24,532				-
Operating Expenses
Depreciation expense		$	46,444			$	16,715
Research and development			20,518				36,080
Professional fees			239,544				148,791
General and administrative			973,091				241,955
Loss from operations			(1,279,597	)			(443,541	)
Other income (Expense)			(11,628	)			259
Net loss		$	(1,266,693	)		$	(443,282	)
Net loss per common share:
Net loss per share, basic and diluted		$	(0.12	)		$	(0.05	)
Weighted average number
of common shares outstanding:
Basic and diluted			10,202,294				8,235,457

 

The Accompanying Notes are an Integral Part of these Financial Statements

 

INDOOR HARVEST CORP
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended December 31, 2015 and 2014

		Preferred Stock, $0.01 Par Value							Common Stock, $0.001 Par Value																				Total Stockholders' Equity (Deficit)
		Shares				Amount			Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Subscription Receivable
Balances, December 31, 2013			-				-				6,505,381			$	6,505			$	359,134			$	(211,797	)		$	-			$	153,842
Issuance of common stock			-				-
For cash			-				-				2,474,000				2,474				872,276				-				(10,000	)			864,750
For services			-				-				273,007				272				67,979				-				-				68,251
Net loss			-				-				-				-				-				(443,282	)			-				(443,282	)
Balances, December 31, 2014			-				-				9,252,388				9,251				1,299,389				(655,079	)			(10,000	)			643,561
Issuance of common stock
For cash			-				-				836,000				836				417,164				-				-				418,000
For services			-				-				1,116,183				1,117				517,110				-				-				518,227
Collection of stock subscription receivable			-				-				-				-				-				-				10,000				10,000
Net loss			-				-				-				-				-				(1,266,693	)			-				(1,266,693	)
Balances, December 31, 2015			-				-				11,204,571			$	11,204			$	2,233,663			$	(1,921,772	)		$	-			$	323,095

 

 

The Accompanying Notes are an Integral Part of these Financial Statements 

 

 

 

The Accompanying Notes are an Integral Part of these Financial Statements

 Nature of operations and organization

Indoor Harvest Corp., or the "Company," is a Texas corporation formed on November 23, 2011.  Indoor Harvest Corp., through its brand name Indoor Harvest™, is a company specializing in equipment 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").

  

Basis of presentation

Use of estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("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 estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for services, equipment and the liquidation of liabilities.

Accounts receivable and concentrations

The Company will recognize revenue on arrangements in accordance with FASB ASC No. 605, “Revenue Recognition”.  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured. The Company will generate revenue from the design and installation of the equipment.

Stock-based Compensation

 

The Company follows ASC 718-10, Stock Compensation, which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 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 per share amounts are calculated based on the weighted average number of shares of common stock outstanding during each period. Diluted earnings 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.

The Company measures its financial assets and liabilities in accordance with GAAP. For certain of our financial instruments, including cash, accounts payable, and the short-term portion of long-term debt, the carrying amounts approximate fair value due to their short maturities.

Property and Equipment

Additions are capitalized and maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in other income.

Intangible Asset

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

Advertising Expense

Advertising and promotional costs are expensed as incurred. Advertising expense was as follows:

Reclassifications

Certain expense items have been reclassified in the statement of operations for the year ended December 31, 2014, to conform to the reporting format adopted for the year ended December 31, 2015.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update “ASU” 2014-15 on “Presentation of Financial Statements Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern”. Currently, there is no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. The amendments in this Update provide that guidance. In doing so, the amendments are intended to reduce diversity in the timing and content of footnote disclosures. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for public and nonpublic entities for annual periods ending after December 15, 2016. Early adoption is permitted. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In July 2015, FASB issued Accounting Standards Update (“ASU”) No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory” more closely align the measurement of inventory in GAAP with the measurement of inventory in International Financial Reporting Standards (IFRS).  The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, this ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, this ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. The amendments in this ASU should be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

In August 2015, FASB issued Accounting Standards Update (“ASU”) No.2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” defers the effective date ASU No. 2014-09 for all entities by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities should apply the guidance in Update 2014-09 to annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. All other entities may apply the guidance in ASU No. 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, including interim reporting periods within that reporting period. All other entities also may apply the guidance in Update 2014-09 earlier as of an annual reporting period beginning after December 15, 2016, and interim reporting periods within annual reporting periods beginning one year after the annual reporting period in which the entity first applies the guidance in ASU No. 2014-09. We are currently reviewing the provisions of this ASU to determine if there will be any impact on our results of operations, cash flows or financial condition.

 We do not believe any other recent pronouncements will have any impact on our presentation of financial position or results of operations.

 

As reflected in the accompanying financial statements, the Company had a net loss of $1,266,693, net cash used in operations of $704,230 and has an accumulated deficit of $1,921,771, for the year ended December 31, 2015. 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.

During the year ended December 31, 2014, the Company paid deposits and or acquired equipment totaling $68,083 which has not been placed in service as of December 31, 2014 and is included in Other Assets as of December 31, 2014. During the year ended December 31, 2015 the Company sold $19,300 of other assets in exchange for $9,300 and recorded a loss on the sale of equipment of $10,050.  The remaining balance of Other Assets as of December 31, 2015 is $48,783.

On December 7, 2015, the Company entered into a consulting agreement where the advisor agreed to provide advertising and promotion services to the Company. The term of this agreement is three months.   As a compensation for services the Company will issue 125,000 shares of common stock with a fair value of $47,500 ($0.38/share), based upon the most recent trading price per share of the Company’s stock and $2,000. For the year ended December 31, 2015 the Company issued 125,000 common shares and paid $2000.

 

A Cannabis Production Pilot Agreement ("Agreement") was entered into as of the 18th day of December 2014 by and between Indoor Harvest Corp. ("Indoor Harvest"), a Texas Corporation, and Tweed Marijuana Inc. ("Tweed"), a Canadian company.

 

 

At December 31, 2015, rental commitments are as follows:

 

On September 18, 2013, the Company entered into a material transfer agreement with the Massachusetts Institute of Technology's Media Lab ("MIT") to provide aeroponics system components and fixtures to be used for the purpose of developing a wall facade aeroponics system as part of MIT Media Lab's Changing Places research. The Company is responsible for providing technical assistance and materials.  In connection with this agreement, MIT has agreed to reimburse the Company $12,242 in costs incurred as of December 31, 2014; the Company has recorded this reimbursement as Other Assets as of December 31, 2014 and a reduction in research and development expense.

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, 2015 the Company repaid $2,838 of the principal and the remaining balance is $33,262.

On March 1, 2015, the Company entered into a Director Agreement with William Jamieson. The Company will 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. The Company shall award to the Director 166,560 shares of common stock pursuant to the Company's 2015 Stock Incentive over a two year period as directed in the Director Agreement.  For the year ended December 31, 2015, the Company issued 62,460 shares of common stock having a fair value of $28,315 ($0.30 - $0.55/share) based upon the most recent trading price per share of the Company’s common stock (See Note 8).

On August 14, 2015, the Company entered into an employment agreement with John Choo, the executive to serve as a Company President.  The term of the agreement will continue until August 14, 2016, unless the employment is sooner terminated by the Board of Directors.  As compensation for services, the employee will receive annual compensation of $60,000. In addition, the employee will receive 355,060 shares of common stock.  In addition, the Company shall award to the Director 166,560 shares of common stock pursuant to the Company's 2015 Stock Incentive over a two year period as directed in the Director Agreement. For the year ended December 31, 2015, the Company issued 355,060 shares in common stock having a fair value of  $164,393 ($0.46/share) and 62,460 shares of common stock having a fair  value of $28,315 ($0.30 - $0.55/share) based upon the most recent trading price per share of the Company’s common stock (See Note 8).

In May 2015, the Company issued 50,000 shares of Common stock to Chad Sykes, our CEO having a fair value of $25,500 ($0.51/share) based upon the most recent trading price per share of the Company’s common  stock (See Note 8).

In November 17, 2015 the Company issued 125,000 shares of Common stock to the Company's legal counsel as part of legal fees having a fair value of $56,250 ($0.45/share) based upon the most recent trading price per share of the Company’s common stock (See Note 8).

In January of 2014, the Company entered into an advisory agreement where the advisor agreed to act as a mentor or advisor to the Company and provide advice and assistance ranging from attending quarterly meetings to providing feedback on Company strategy to making introductions and assisting in acquisitions. The Company issued 65,552 common shares in connection with this agreement with a fair value of $16,388 ($0.25/share) based upon the most recent trading price per share of the Company’s common stock. All shares to be issued per this agreement have been issued.

In January of 2014, the Company issued 207,455 shares of Common stock to the Company's legal counsel as part of legal fees with a fair value of $51,864 ($0.25/share) based upon the most recent trading price per share of the Company’s common stock.

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 U.S. 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, 2015 are as follows:

At December 31, 2015 and 2014, the Company has provided a full valuation allowance for the deferred tax assets. The Company’s accumulated net operating loss as of December 31, 2015 of $1,347,653, if not used, will begin to expire in 2035.

This loss carry forward expires according to the following schedule:

 

On August 3, 2015, the Company's Board of Directors signed a written action that included the following:

·

The Board of Directors have approved the creation of 5,000,000 shares of Series A Convertible Preferred Stock and to take the required steps to amend the Corporations articles of incorporation and any other such SEC filings, or Company records as needed

·

The Board of Directors have approved a Certificate of Designation, Preferences and Rights of the Series A Convertible Preferred Stock.

·

The Board of Directors have approved a Regulation D, Rule 506(c) offering of up to 5,000,000 shares of Series A Convertible Preferred Stock in order to raise up to $5,000,000 in capital per the Company's Plan of Operation and to take the steps to file the required SEC and State filings

For the year ended December 31, 2015, none of the preferred stock was issued and outstanding.

In January of 2015, the Company issued 144,000 shares of common stock to the Company's legal counsel as part of legal fees with a valuation of $72,000 ($0.50/share) at the most recent price per share for cash sales of the Company's stock.

On March 1, 2015, we entered into a Director Agreement with William Jamieson. The Company will 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. The Company shall award to the Director 166,560 shares of common stock pursuant to the Company's 2015 Stock Incentive over a two year period as directed in the Director Agreement.  On May 31, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $10,618 ($0.51/share) based upon the most recent trading price per share of the Company’s stock.  On August 31, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $11,451 ($0.55/share) based upon the most recent trading price per share of the Company’s stock.  On November 30, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $6,246 ($0.30/share) based upon the most recent trading price per share of the Company’s common stock.

On March 13, 2015, we entered into a Director Agreement with John Choo. The Company will 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. The Company shall award to the Director 166,560 shares of common stock pursuant to the Company's 2015 Stock Incentive over a two year period as directed in the Director Agreement.  On May 31, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $10,618 ($0.51/share) at the most recent trading price per share of the Company’s stock.  On August 31, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $11,451 ($0.55/share) based upon the most recent trading price per share of the Company’s stock. On November 30, 2015, the Company issued a total 20,820 shares of common stock with a fair value of $6,246 ($0.30/share) based upon the most recent trading price per share of the Company’s stock. Effective August 14, 2015, the Company entered into an employment agreement and the Company issued 355,060 shares of Common Stock to John Choo, our President with fair value of $164,393 ($0.46/share) based upon the most recent trading price per share of the Company’s stock (See Note 4).

On March 23, 2015 we entered into a consulting agreement with Smallcapvoice.com to provide public and investor relations services for a period of 30 days starting on March 31, 2015. The Company paid $25,000 in cash plus issued 25,000 shares with a fair value of $12,500 ($0.50/share) based on the most recent closing price per share of our common stock traded on the OTCQB.  For the three months ended March 31, 2015, the Company recorded $25,000 paid in cash and 25,000 shares of common stock as a prepaid expense. As of June 30, 2015 the services have been completed and the Company expensed the prepaid expense.

On April 15, 2015, we entered into a Director Agreement with John Zimmerman. The Company will 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. The Company shall award to the Director 166,560 shares of common stock pursuant to the Company's 2015 Stock Incentive over a two year period as directed in the Director Agreement. On July 15, 2015, the Company issued 20,820 shares, of common stock with a fair value of $9,369 ($0.45/share) based upon the most recent trading price per share of the Company's stock.  On October 16, 2015, the Company issued 20,820 shares, of common stock with a fair value of $9,992 ($0.48/share) based upon the recent trading price per share of the Company's stock

In May 2015, the Company issued 106,500 shares of Common Stock to various employees and consultants with a fair value of $54,315 ($0.51/share) based upon the most recent trading price per share of the Company’s stock.

In May 2015, the Company issued 50,000 shares of Common Stock to Chad Sykes, our CEO with a fair value air  of $25,500 ($0.51/share) at the most recent trading price per share of the Company’s stock (See Note 4).

On August 31, 2015, the Company issued 12,000 shares of Common Stock for consulting expense with a fair value  $6,600 ($0.55/share) based upon the most recent trading price per share of the Company’s stock.

In November 17, 2015 the Company issued 125,000 shares of Common stock to the Company's legal counsel as part of legal fees with a fair value of $56,250 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On December 1, 2015, the Company issued 7,063 shares of Common Stock for consulting expense with a fair value of $3,178 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On December 7, 2015, the Company issued 125,000 shares of Common Stock to FMW Media Works, Inc. in order to provide investor and public relations services. The Company recorded a fair value of $47,500 ($0.38/share) based upon the most recent trading price per share of the Company’s stock.

During the year ended December 31, 2015, the Company issued a total of 836,000 shares of common stock at $0.50 per share for cash totaling $418,000.

 

On January 17, 2016, the Company issued 20,820 shares of Common Stock related to a Director Agreement with John Zimmerman, of common stock with a fair value of $9,369 ($0.45/share) based upon the most recent trading price per share of the Company’s stock.

On January 19, 2016, we issued 300,000 shares of Common Stock to Kodiak Capital Group, LLC as a commitment fee for a Two Million Dollar Equity Financing Agreement. The Company a fair value of $120,000 ($0.40/share) based upon the most recent trading price per share of the Company’s stock. The Company is subject to a Registration Rights Agreement which requires the Company to file a S1 Registration Statement with the SEC by March 31, 2016 and must receive a notice of effectiveness from the SEC prior to executing a Put Notice. The Purchase Price of the security is based on 80% of the Market Price based on the Put Date. Market price is calculated on the lowest daily volume weight average price for any trading day during the valuation period, which is the five days from the Put Notice to the Put Date.

On January 22, 2016, we issued 125,000 shares of Common Stock to Emerging Growth, LLC, to provide investor and public relations services. The Company recorded a fair value of $43,750 ($0.35/share) based upon the most recent trading price per share of the Company’s stock.

On February 29, 2016, we issued 41,640 shares of Common Stock related to a Director Agreement with John Choo and William Jamieson. The Company recorded fair value of $14,574 ($0.35/share) based upon the most recent trading price per share of the Company’s stock.

On March 14, 2016, we issued 11,330 shares to a consultant for services rendered, of common stock with a fair value of $4,986 ($0.44/share) based upon the most recent trading price per share of the Company’s stock.

On March 22, 2016 the Company entered into a securities purchase agreement with Firstfire Global Opportunities Fund, LLC, and Rockwell Capital Partners Inc, relating to the issuance and sale of notes of $272,500 in aggregate principal amount including $250,000 actual payment of purchase price plus a 9% original issue discount, and an aggregate total of 50,000 shares of common stock valued at $23,500 ($0.47/share). The notes carry an interest on the unpaid principal amount at the rate of 3% per annum. Any Principal Amount or Interest which is not paid when due shall bear interest at the rate of 15% per annum from the due date until the same is paid. The notes mature on September 22, 2016 and may be prepaid in whole or in part except otherwise explicitly set forth in the Note. If the Company exercises its right to prepay or repay the Note, the Company shall make payment to the note holders of an amount in cash equal to the sum of 125% multiplied by the Principal Amount plus accrued and unpaid interest on the Principal Amount to the Optional Prepayment Date plus Default Interest, if any. the notes convert into shares of Common Stock at a price equal to $0.30; provided, however that from and after the occurrence of any Event of Default hereunder, the Conversion Price shall be the lower of: (i) the Fixed Conversion Price or (ii) 45% multiplied by the lowest sales price of the Common Stock in a public market during the ten (10) consecutive Trading Day period immediately preceding the Trading Day that the Company receives a Notice of Conversion (as defined in the Note).

On March 23, 2016 the Company issued 100,000 shares of common stock to one U.S. accredited investor at $0.50 per share for cash totaling $50,000.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

None

Item 9A. Controls and Procedures

 

The Company's Chief Executive Officer/ Chief Financial Officer has 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, 2015. Based upon such evaluation, the Chief Executive Officer/Chief Financial Officer has concluded that, as of December 31, 2015, the Company's disclosure controls and procedures were effective. This conclusion by the Company's Chief Executive Officer/Chief Financial Officer does not relate to reporting periods after December 31, 2015.

This weakness also is due to our CEO and CFO being the same person.

 

In order to mitigate these material weaknesses to the fullest extent possible, all work of the CFO is reviewed by a Director of the Company. All unexpected results are investigated. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it will be immediately implemented. The Company continues to study the implementation of additional internal controls over accounting and financial reporting. 

No change in the Company's internal control over financial reporting occurred during the quarter ended December 31, 2015, that materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

 

Item 9B. Other Information

 

None.

 

 PART III

 

Item 10. Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance with Section 16(a) of the Exchange Act Directors and Officers

 

The following sets forth our officers and directors as of December 31, 2015.  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:

Mr. Chad Sykes is the sole founder and CEO of Indoor Harvest, Corp. He designed and developed the Company's modular aeroponic system and has been responsible for all R&D since inception. Prior to founding Indoor Harvest, Mr. Sykes operated a boutique investor and public relations consulting firm. For the past five years, Mr. Sykes has helped generate market awareness and investor relation programs for six publicly traded small and microcap companies in the manufacturing, healthcare, oil & gas and agricultural industries.

Prior to 2007, Mr. Sykes served in the U.S. Army. During his 5-year enlistment he served two combat tours to Iraq during OIF1 and OIF3. Serving as a M1A1 Abrahams Tank Crewman in OIF1 and then later serving at the Brigade level for S4 logistics operations during OIF3.

Before joining the U.S. Army, Mr. Sykes worked in the mechanical trades construction industry for 10 years. Mr. Sykes was a member of Plumbers Local Union 68, he previously managed projects for Gowan, Inc., Har-Con Mechanical, Letsos Company and MLN Company. He held positions as a medical gas endorsed journeyman plumber, plumbing superintendent and project manager. His primary industry focus was medical gas systems, process piping and control systems. As a member of the board, Mr. Sykes contributes his knowledge of the Company and a deep understanding of all aspects of our business, products and markets, as well substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.

On March 13, 2015, Mr. John Choo was elected as a Director and on August 14, 2015 was elected as President of the Corporation. From April to December 2014, Mr. Choo held positions at Tweed Marijuana, Inc., a medical cannabis producer and distributor in Canada, as Architect of Strategic Alliances and Specialized Business Development. From May 2012 to April 2014, Mr. Choo operated a consultancy as a Chief Strategist providing clients with professional strategy development for pre and post IPO technology companies.

From April 2008 through May 2012, Mr. Choo was a partner and Director of Business Development for Tekinsion, Inc., a technology company providing products and user experience design for the mobile industry. From November 2004 through April 2008, Mr. Choo held the position as Sr. Business Analyst for Sitebrand, Inc., an E-Commerce marketing software Company.  In 1997, Mr. Choo received a degree in Law and Administration from Algonquin College in Ottawa Ontario.

Mr. Choo has spent over a decade in the technology space advising pre and post IPO organizations on strategy architecture and execution. Leading early stage groups into international technology IP licensing, product and services architecture, acquisitions and valuation building for investment activities.  As a member of the board, Mr. John Choo contributes the benefits of his executive leadership and management experience in developing corporate strategy, assessing emerging industry trends, and business operations.  His contributions and deep understanding of all aspects of our business, products and markets will provide substantial experience to fuel our corporate growth.

On March 1, 2015, Mr. William Jamieson was elected as a Director of the Corporation.  Since January 2010, he has been owner of 420 Patients LLC, a Consulting Company. He holds a Bachelor's Degree: BA- Psych from Arizona State University 1994 and a Master's Degree: MA- Clinical Psych from Arizona School of Professional Psychology 2000.

As a member of the board, Mr. Jamieson contributes significant industry-specific experience and expertise. He obtained his Masters degree in Clinical Psychology in 2000 and has focused much of his career on pain management and cannabis therapy. Having a lifetime of cultivation experience and over 20 years' experience in the medical marijuana industry he brings a wealth of executive leadership and management experience. Mr. Jamieson will contributes this and a deep understanding of all aspects of the this business, products and markets, as well substantial experience developing corporate strategy, assessing emerging industry trends, and business operations.

On April 15, 2015, John Zimmerman was elected as a Director of the Corporation. Currently Mr. Zimmerman is the Director of Sales and Marketing at PUE 1.0. Prior to joining PUE 1.0, Mr. Zimmerman held positions as a Project Manager and Business Development Manager for The Brandt Companies, from February 2011 until July 2014. From January 2004 through February 2011, Mr. Zimmerman held the position of Project Manager for TDIndustries.  In these positions, he spent much of his career designing, selling, and building mechanical systems for large-scale commercial buildings.

 

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

 

 

We do not currently have a Code of Ethics applicable to our principal executive, financial or accounting officer.

We are not subject to the requirements of Section 16(a) of the Securities Exchange Act of 1934, as amended, during our fiscal year 2015.

 

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 two completed fiscal years for all services rendered to the Company. 

 

Name and Position	Year		Salary ($)				Bonus ($)				Stock Awards ($)(2)					Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Nonqualified Deferred Compensation ($)				All Other Compensation ($)				Total ($)
Chad Sykes	2015			70,000				0					25,500				0				0				0				0				95,500
CEO, Secretary	2014			70,000				0					0				0				0				0				0				70,000
John Choo President (1)	2015			50,000				5,000					164,393				0				0				0				0				219,393
	2014			0				0					0				0				0				0				0				0

(1)  Appointed President on August 14, 2015

(2)  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.

Narrative Disclosure to Summary Compensation Table

We currently do not have a stock option plan. We do not currently have an incentive plan that provides compensation intending to serve as an incentive for performance.

Chad Sykes

During fiscal year 2014, Mr. Sykes was our only executive officer and was compensated $70,000 in annual salary.

Mr. Sykes earned total cash compensation for his services to the Company in fiscal year 2015 in the amount of $70,000. This represents his annual base salary for fiscal 2015. The base salary paid to Mr. Sykes for fiscal year 2015 constituted approximately 74.11% of the total compensation paid to Mr. Sykes as set forth in the “Total” column in the Summary Compensation Table.

 

In May 2015, the Company issued 50,000 shares of Common Stock to Chad Sykes, our CEO with a valuation of $25,500 ($0.51/share) at the most recent trading price per share of the Company’s stock.

John Choo 

Mr. Choo earned total cash compensation for his services to the Company in fiscal year 2015 in the amount of $50,000. Mr. Choo was also provided a cash bonus of $5,000 bringing the total cash compensation paid in fiscal year 2015 to $55,000. The base salary plus bonuses paid to Mr. Choo for fiscal year 2015 constituted approximately 25% of the total compensation paid to Mr. Choo.

 

Effective August 14, 2015, the Company entered into an employment agreement and the Company issued 355,060 shares of Common Stock to John Choo, our President with valuation of $164,393 ($0.46/share) at the then most recent trading price per share of the Company’s stock. Combined with cash compensation, Mr. Choo's total compensation for fiscal year 2015 was $219,393.

Outstanding Equity Awards

 

We had no outstanding equity awards as of the fiscal years ended December 31, 2013 or 2014.

 

Employment Contracts, Termination of Employment, Change-in-Control Arrangements

 

We entered into an Executive Employment Agreement as of September 1, 2015, with Chad C. Sykes (the "Executive").  The principal terms of the Agreement are as follows:

(a) Base Salary

During the term of this Agreement and for 5 years after any termination of this Agreement, Executive will not, without the prior written consent of the Company, either directly or indirectly, on Executives' own behalf or in the service or on behalf of others, solicit or attempt to solicit, divert or hire away any person employed by the Company, or any customer of the Company.

 

 

Indemnification.

The Company shall indemnify the Executive, to the maximum extent permitted by applicable law and by its certificate of incorporation, against all costs, charges and expenses incurred or sustained by the Executive in connection with any action, suit or proceeding to which he may be made a party by reason of being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company or any other corporation for which the Executive serves in good faith as an officer, director, or employee at the Company's request.

 

We entered into an Executive Employment Agreement as of August 14, 2015, with John Choo (the "Executive").  The principal terms of the Agreement are as follows:

(a) Base Salary

        (iii) Equity. Executive, or an entity controlled by the executive such that the executive is deemed the sole beneficial owner under SEC Rule 13d-3, shall receive a total of 355,060 shares of restricted common stock .

During the term of this Agreement and for 5 years after any termination of this Agreement, Executive will not, without the prior written consent of the Company, either directly or indirectly, on Executives' own behalf or in the service or on behalf of others, solicit or attempt to solicit, divert or hire away any person employed by the Company, or any customer of the Company.

 

 

Director Compensation

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named directors by the Company during the year ended December 31, 2015.

 

 

(1) On March 13, 2015, we entered into a Director Agreement with John Choo. The Agreement provides Mr. Choo will be compensated as follows:

    A. Expenses. The Company will 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.

    B. Stock Awards. The Company shall award to the Director 166,560 shares of Common Stock pursuant to the Company's 2015 Stock Incentive. The table below sets forth the award date, amount and vesting date.

If the Director is a Director both at the Date of Award and Date of Vesting, the shares for each award in the Table above shall be fully vested, a certificate representing the shares shall be issued and shall be non-forfeitable. If the Director is not a Director at the Date of Award, the shares for each award in the Table above at that date and thereafter shall not be awarded.  If the Director is a Director at the Date of Award and not at the Date of Vesting, the shares for each such award in the Table above shall be forfeited, no shares shall be issued thereafter and a certificate representing the shares shall not be issued.

( 2) On March 1, 2015, we entered into a Director Agreement with William Jamieson. The Agreement provides Mr. Jamieson will be compensated as follows:

    A. Expenses. The Company will 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.

    B. Stock Awards. The Company shall award to the Director 166,560 shares of Common Stock pursuant to the Company's 2015 Stock Incentive. The table below sets forth the award date, amount and vesting date.

 

If the Director is a Director both at the Date of Award and Date of Vesting, the shares for each award in the Table above shall be fully vested, a certificate representing the shares shall be issued and shall be non-forfeitable. If the Director is not a Director at the Date of Award, the shares for each award in the Table above at that date and thereafter shall not be awarded.  If the Director is a Director at the Date of Award and not at the Date of Vesting, the shares for each such award in the Table above shall be forfeited, no shares shall be issued thereafter and a certificate representing the shares shall not be issued.

(3) On April 15, 2015, we entered into a Director Agreement with John Zimmerman. The Agreement provides Mr. Zimmerman will be compensated as follows:

    A. Expenses. The Company will 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.

    B. Stock Awards. The Company shall award to the Director 166,560 shares of Common Stock pursuant to the Company's 2015 Stock Incentive. The table below sets forth the award date, amount and vesting date.

If the Director is a Director both at the Date of Award and Date of Vesting, the shares for each award in the Table above shall be fully vested, a certificate representing the shares shall be issued and shall be non-forfeitable. If the Director is not a Director at the Date of Award, the shares for each award in the Table above at that date and thereafter shall not be awarded.  If the Director is a Director at the Date of Award and not at the Date of Vesting, the shares for each such award in the Table above shall be forfeited, no shares shall be issued thereafter and a certificate representing the shares shall not be issued.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following tables set forth the ownership, as of the date of this prospectus, 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 not any 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 5300A East Freeway, Houston, Texas 77020.

 

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. Except as set forth above, applicable percentages are based upon 11,204,571 shares of common stock outstanding as of December 31, 2015.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

There were no related party transactions in 2014 or 2015.

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

 

L.L Bradford & Company, LLC was our independent auditor for the fiscal year ended December 31, 2013 and RBSM LLP was our independent auditor for the fiscal year ended December 31, 2014

The following table shows the fees paid or accrued by us for the audit and other services provided by our auditor for fiscal 2014 and 2015.

 

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

 

Exhibit No.		Document Description
10.1		Employment Agreement with John Choo
31.1		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
32.1 *		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002
Exhibit 101		Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

 

 

 

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.

Indoor Harvest, Corp., a Texas corporation

 

 

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:

 

 

 

EXHIBIT INDEX

 

Exhibit No.		Document Description
10.1		Employment Agreement with John Choo
31.1		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002.
32.1 *		CERTIFICATION of CEO PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEYACT OF 2002
Exhibit 101		Interactive data files formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to the Consolidated Financial Statements.**
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**